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How is development finance repaid?

Paying back once your development is complete

Property development financers can help you to achieve your goal.

Be it building a new housing development, renovating a derelict property or updating your home.

However, you will only be considered eligible for development finance if you can prove to the lender that you have a viable exit strategy.

An exit strategy is a method by which you intend to repay the loan, which includes either the sale, refinancing of or long-term refinancing of the property.

  • One could sell the property or site upon completion of the project, raising enough funds to repay the loan in full,
  • Refinance the property
  • Or arrange long-term refinancing by retaining ownership of the property long-term, or renting it out at a profit.

How are development finance facilities typically repaid?

As with other forms of loans, interest is usually added to a development finance loan on a monthly basis, although an annual interest fee can also be arranged.

It is advisable to repay a development loan as soon as possible to minimise the overall borrowing costs.

Typically, the loan is repaid through refinancing or selling the property on completion of the project.

This is established at the beginning of the process so that the lender can establish a timeframe for the project and repayment.

Build to sell is when the developer completes a project with the intention of selling it, in order to cover the loan costs.

Build to rent is when a longer-term borrowing facility is used to repay the initial loan while enabling the developer to retain ownership of the property or site, to rent it out.

A combined approach applies when the development is partially sold-off upon completion.

What is an exit strategy?

An exit strategy is a plan by which you repay a property development loan.

When you take a loan with Hunter Finance, we recommend you have a strong exit strategy in place.

As it not only makes your loan application with us faster, it is also more likely to be successful.

We assess all loan application on an individual case-by-case basis. As our loans are generally repaid by those who borrow from us, we don’t offer exit loans.

Developers who seek exit loans tend to go through buy-to-let mortgages or refinance loans.

For most property developers, the exit strategy is to repay the development loan on sale of the property or site.

For those developing a property for sale, the exit strategy is typically to use the equity from the sales to pay off your development finance loans.

What support will I get throughout the repayment process?

When both parties have agreed to the type of development finance they will receive, we can be flexible when it comes to the repayment of the loan.

As long as you have a clear and viable plan in place, we will be supportive throughout the process of your property development project.

Unlike mainstream banks, we won’t immediately reject your project based on your experience or on the size of your loan.

  • In return, all we ask is for is clarity in your proposal so that we can be confident that you are able to repay the loan.
  • We will respond to your application within 24 business hours if we can support your project. We will not prolong the loan process with lengthy credit checks or hold up your development.

In many cases, we aim to have the funds available for your development within 10 working days.

For more information about repaying your property development finance or to discuss your exit strategy, contact us today.

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If we can help we will say so, if we can’t we will be able to point you in the right direction or suggest alternative financial vehicles.