Considering development finance? Use this simple calculator to understand how much you could borrow and how much it will cost.
Property security
Initial loan (day 1)
Construction loan
Interest
This calculator is intended for illustration purposes only and exact payment terms should be agreed with a lender before taking out a loan.
Facility overview
Loan term
-
Total facility amount
-
Annual interest rate
-
Initial loan (day 1) interest allowance
-
Construction costs loan interest allowance
-
Available balance
-
Breakdown of loan facility
Gross initial loan (day 1)
-
Gross LTV
-
Arrangement fee (2%)
-
Net initial loan (day 1)
-
Construction
Loan facility (100% costs)
-
Project overview
Current property value
-
Total development costs
-
Gross development value
-
LTGDV
-
LTC
-
Exit fee (2%)
-
Developer's equity contribution
-
Profit
-
Profit on cost
-
GDV per unit
-
GDV per square foot
-
Construction cost per square foot
-
Unlike regular home or business mortgages, development loans are paid out in stages from an agreed loan pool. Lenders will typically limit the funds they are willing to provide to no more than 65% of land purchase costs, and up to 100% of the construction costs.
Here’s an example of new-build development finance:
A plot of land has been sourced that has planning permission to build ten, three bedroom detached houses. The land can be purchased for £600,000 and the cost to build all ten houses will be £2,000,000. Total deal costs are £2,600,000, excluding fees and interest.
The estimated value of each house after construction (including their freehold), is £350,000 meaning a Gross Development Value (GDV) of (10 x £350,000) £3,500,000.
Development finance can be used to raise up to 65% of the land cost = £390,000 and 100% of the build cost = £2,000,000. This is also subject to the total borrowing requirement not exceeding 70% of the Gross Development Value (LTGDV), which in this scenario is 68% (£2,390,000 vs £3,500,000).
A loan facility is set up for £2,390,000. (The pool). Funds are released in stages, with an initial release of £390,000 to help buy the land. The developer will provide cash in the sum of £180,000 to complete the land purchase.
The remaining £2,000,000 will be released in stages as the new-build progresses. The borrower will use their cash first, with the lender then following with further drawdowns.
The borrowed sum of £2,390,000 plus interest is repaid when the houses are sold on completion. As this deal is not a joint venture, the developer retains all the profits.
With most development loans, interest is only charged on funds that have been drawn from the loan pool.
The interest rate charged on development loans is directly linked to the lenders perceived risk of the deal. Therefore, the more you borrow against the total project cost, the higher the interest rate is likely to be. Therefore, any developer needs to trade off the cash they have available to contribute towards the scheme vs the interest rate they are willing to pay to borrow the funds.
Join the 70,000+ businesses just like yours getting the Swoop newsletter.
Free. No spam. Opt out whenever you like.
We work with world class partners to help us support businesses with finance
Address
Suite 42, 4th Floor, Oriel Chambers, 14 Water Street, Liverpool, L2 8TD
View in Google MapsVisit website
Contact us
Address
Suite 109, Somerset House, 37 Temple Street, Birmingham, B2 5DP
View in Google MapsVisit website
Contact us
Address
Aberystwyth Innovation and Enterprise Campus
Gogerddan Campus
Aberystwyth University
Ceredigion
SY23 3EE
Visit website
Contact us
Address
Dogpatch Labs, The CHQ Building, Custom House Quay, Dublin, Ireland
View in Google MapsVisit website
Contact us
Address
Level 2/477 Pitt Street, Sydney NSW 2000, Australia
View in Google MapsVisit website
Contact us
Address
43 W 23rd St, New York, NY 10010, United States
View in Google MapsVisit website
Contact us
Address
21 Dreyer Street, Cape Town, South Africa, 7708
View in Google MapsVisit website
Contact us
Clever finance tips and the latest news
delivered to your inbox, every week
Join the 70,000+ businesses just like yours getting the Swoop newsletter. Free. No spam. Opt out whenever you like.
We use necessary cookies to make our site work. You can change your cookie settings in Cookie Preferences
closeOur use of cookies
We use necessary cookies to make our site work. We'd also like to set optional third-party cookies to help us improve the experience. Using this website will set a cookie on your device to remember your preferences.
For more detailed information, please see our Cookie Policy
Necessary Cookies
These are cookies that are set by Swoop necessary for our website to function.
Third Party Cookies
These are services that are set by Third party companies in order to help us to understand and improve our website, remember preferences and to display advertising.
Necessary Cookies
We require some cookies for the operation of our website, which do not gather information about you that could be used for marketing or remembering where you have been on the internet.
For more detailed information visit our Cookie Policy
Third Party Cookies
These cookies help us to improve our website by collecting and reporting information on how you use it. The cookies collect information in a way that does not directly identify anyone.
For more detailed information visit our Cookie Policy