Development Finance

Specialist finance for property development projects

Property development rarely follows the same financial pattern as purchasing a completed home or investment property.

A development may involve acquiring land, obtaining or improving planning permission, carrying out structural work, constructing new homes, converting an existing building or managing a project over several phases.

The funding must therefore reflect:

• the purchase or current value of the site

• the cost of completing the development

• when those costs will be incurred

• the value of the finished scheme

• the developer’s experience and financial contribution

• the risks within the project

• how the facility will ultimately be repaid

At Moveo Mortgages, we’ll take the time to understand the proposed development before approaching suitable lenders within the scope of our service.

We’ll discuss:

• the site or property

• the planning position

• your development experience

• the proposed works

• the cost plan

• the project programme

• your available contribution

• the expected gross development value

• your proposed exit strategy

We’ll then explain the relevant development-finance options, likely lender requirements and the costs and risks you should consider before deciding whether to proceed.

Development finance is not simply a larger residential mortgage.

It is specialist, short-term secured funding for a defined project, and the lender will assess both the borrower and the commercial viability of the development.

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Find the Information You Need

Use the links below to move directly to the section most relevant to you:

• What is development finance?

• What can development finance be used for?

• Development finance or a standard mortgage?

• Development finance or a bridging loan?

• How does development finance work?

• Site acquisition and development costs

• Staged drawdowns

• How interest may be charged

• What are loan-to-cost and loan-to-GDV?

• What is gross development value?

• The development appraisal

• What do development lenders assess?

• Your experience as a developer

• First-time developers

• Planning permission and building regulations

• Funding a site without planning permission

• Development valuations

• The monitoring surveyor

• Conditions before the first drawdown

• Ground-up development

• Conversions and change of use

• Heavy refurbishment

• Mixed-use and commercial development

• Development through a limited company or SPV

• Personal guarantees

• Security required by the lender

• Your financial contribution

• Contingency and cost overruns

• Delays and extension fees

• The exit strategy

• Selling the completed development

• Refinancing onto a longer-term mortgage

• Development exit finance

• What documents might you need?

• The development-finance process

• Tax, VAT and professional advice

• Key risks of development finance

• Why choose Moveo Mortgages?

• Frequently asked questions

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What Is Development Finance?

Development finance is specialist short-term lending used to fund property construction, conversion or substantial redevelopment.

Unlike a normal mortgage, the facility is usually assessed by reference to both:

• the borrower’s ability to deliver the project

• the financial viability and value of the proposed development

The lender may provide funding towards:

• purchasing the site or existing property

• construction or conversion costs

• professional fees

• certain agreed project expenses

• interest and lender costs, where permitted by the facility

The structure depends on the lender, borrower and project.

Development funding is commonly released in stages as the work progresses rather than the entire construction budget being provided on day one.

The facility will normally have a defined term and an agreed repayment strategy.

This may involve:

• selling the completed units

• refinancing the finished property onto a residential, buy-to-let or commercial mortgage

• repaying the lender from another agreed source

The exit strategy is central to the lender’s decision.

What Can Development Finance Be Used For?

Development finance may be considered for projects such as:

• constructing one or more new homes

• building an apartment scheme

• converting a house into flats

• converting commercial premises into residential accommodation

• converting offices, barns or other buildings

• completing a substantial structural refurbishment

• demolishing an existing building and constructing a replacement

• developing mixed residential and commercial premises

• completing a part-finished development

• funding infrastructure or enabling work connected with a development

• developing property for sale

• developing property to retain and refinance

The appropriate facility will depend on the scale and nature of the work.

A relatively light refurbishment may be more suited to bridging finance or another short-term facility.

A project involving substantial structural work, staged construction costs and monitoring is more likely to require formal development finance.

Development Finance or a Standard Mortgage?

A standard residential or buy-to-let mortgage is generally designed for a property that is already suitable for occupation or letting.

A development project may involve a property that:

• does not yet exist

• is not currently habitable

• requires structural alteration

• will be divided into several units

• will change use

• has incomplete services

• will be demolished

• cannot currently produce rental income

A standard mortgage lender may therefore be unwilling to lend against the property in its present condition.

Development finance is designed to assess the property based on:

• its current condition and value

• the proposed works

• the cost of completing those works

• the expected value after completion

• the developer’s ability to deliver the project

• the proposed exit

The facility is normally short-term and is not intended to remain in place as the permanent mortgage once the development is complete.

Development Finance or a Bridging Loan?

Development finance and bridging finance are both forms of short-term secured lending, but they are not interchangeable.

Bridging Finance

A bridging loan may be considered where the main requirement is:

• acquiring a property quickly

• funding a relatively light refurbishment

• completing before another property is sold

• resolving a short-term timing gap

• purchasing a property before arranging longer-term finance

The lender may release most or all of the agreed facility at completion, subject to its terms.

Development Finance

Development finance is more likely to be used where:

• construction costs are substantial

• the work will take place over several stages

• the property will be materially changed

• the lender requires a detailed development appraisal

• a monitoring surveyor will oversee progress

• construction funds need to be drawn in stages

• the project involves multiple units or ground-up development

Some projects may use a bridging loan for acquisition before moving into a development facility.

Others may be structured entirely through one development lender.

The most suitable route depends on the site, planning position, programme, costs and exit strategy.

Read our Bridging Loans guide.
Internal link: Bridging Loans

How Does Development Finance Work?

Although each lender and project is different, a facility may consist of two main elements:

Funding Towards the Site or Property

The lender may provide an agreed amount towards:

• purchasing the site

• refinancing an existing acquisition loan

• repaying another lender

• releasing funds against a site already owned

The amount will depend on factors such as:

• the purchase price

• the current market value

• planning status

• the borrower’s contribution

• the proposed development

• the lender’s maximum leverage

Funding Towards the Development Costs

The lender may also agree a facility towards eligible construction and professional costs.

Rather than releasing the full development budget immediately, the funds are normally drawn in stages as work is completed.

The lender will want to remain satisfied that:

• the work is progressing

• expenditure is broadly in line with the agreed budget

• the project remains financially viable

• sufficient funds remain to complete the development

• the borrower continues to comply with the facility agreement

Homes England’s current monitoring-surveyor framework describes staged drawdowns being certified against the agreed development appraisal, cash-flow statement, plans and progress on site.

Site Acquisition and Development Costs

A development appraisal should separate the acquisition cost from the cost of completing the scheme.

Acquisition Costs

These may include:

• the land or property purchase price

• applicable property taxes

• legal fees

• valuation fees

• lender fees

• auction costs, where applicable

• planning or due-diligence costs already incurred

Development Costs

These may include:

• demolition

• groundworks

• construction

• materials

• contractor costs

• mechanical and electrical work

• utility connections

• professional fees

• planning and building-control costs

• warranties

• insurance

• sales and marketing costs

• finance costs

• contingency

Not every cost will necessarily be funded by the lender.

Some lenders may expect the borrower to pay particular expenses before drawing development funds.

The facility agreement and lender’s cost schedule should make clear which costs are eligible.

Staged Drawdowns

Construction funding is commonly released through staged drawdowns.

This helps the lender control how its funds are used and assess whether the development remains on track.

A simplified drawdown process may involve:

1. The developer completes a stage of work.

2. A drawdown request is submitted.

3. The lender’s monitoring surveyor inspects the project or reviews the relevant evidence.

4. The surveyor reports on progress, expenditure and remaining costs.

5. The lender approves all or part of the requested drawdown.

6. Funds are released in accordance with the facility terms.

The monitoring surveyor may be required to confirm that spending is consistent with the development appraisal and project plans before each drawdown is released.

Drawdowns May Be Paid in Arrears

Depending on the lender and facility, the borrower may need to fund work before receiving the corresponding drawdown.

This can create a cash-flow requirement.

You should understand:

• whether funds are released in advance or arrears

• how frequently drawdowns can be requested

• the minimum drawdown amount

• how long approval normally takes

• whether VAT is included

• which invoices or evidence are required

• whether the lender retains part of each drawdown

• who pays the monitoring-surveyor fee

A project can be profitable on paper but still encounter difficulty if it does not have enough working capital between drawdowns.

How Interest May Be Charged

Development-finance interest can be structured in different ways.

Depending on the lender and facility, it may be:

• paid monthly

• deducted from the facility

• retained by the lender

• added to the balance

• calculated only on funds actually drawn

• calculated partly on undrawn funds through a commitment or non-utilisation fee

The structure must be understood clearly.

Retained or Rolled-Up Interest

Where interest is retained or added to the loan, there may be no monthly interest payment from the borrower’s own cash flow.

However:

• the loan balance increases

• interest may be charged on the growing balance

• retained interest uses part of the total facility

• insufficient retained interest may become a problem if the project is delayed

Serviced Interest

Where interest is paid monthly, the borrower must demonstrate that the payment can be maintained during the development.

Default and Extension Interest

If the project runs beyond the agreed term or the facility conditions are breached, a higher interest rate or additional fee may apply.

The precise terms must be reviewed before commitment.

What Are Loan-to-Cost and Loan-to-GDV?

Development lenders commonly assess leverage using more than one measure.

Loan-to-Cost

Loan-to-cost compares the amount of debt with the agreed project cost.

Depending on the lender, the cost base may include:

• site acquisition

• construction costs

• professional fees

• finance costs

• other eligible project costs

The exact definition must be checked.

A lender may describe its maximum as a percentage of:

• total development cost

• build cost

• acquisition and construction cost

• another defined cost figure

Loan-to-Gross Development Value

Loan-to-GDV compares the total facility or expected peak debt with the projected value of the completed development.

RICS guidance for lender monitoring identifies loan-to-gross-development-value as a measure used to limit the debt facility by reference to the completed scheme’s value.

Why Both Measures Matter

A development can have:

• a strong expected end value

• but an unusually high construction budget

Alternatively, it may have:

• a relatively modest cost

• but limited projected profit

The lender will normally want the project to remain within all relevant leverage limits, not just one.

The lender’s valuation and approved cost plan will usually take precedence over the developer’s own estimates.

What Is Gross Development Value?

Gross development value, usually shortened to GDV, is the estimated value of the completed development.

For a scheme being sold, this may be based on the expected combined sale value of the finished units.

For an investment scheme, the valuer may also consider the expected rental income and investment value.

RICS describes GDV as the value of the completed development used within the development appraisal. Its residual approach broadly deducts the costs of undertaking the development, including an allowance for developer return, from the GDV.

GDV Is an Estimate

The completed value cannot be guaranteed.

It can be affected by:

• property-market changes

• sales demand

• achieved specification

• unit sizes and layouts

• planning changes

• construction quality

• comparable sales

• interest rates

• the timing of completion

A lender will normally appoint or rely on an independent valuer.

The lender may use a lower GDV than the developer expects.

This can reduce the available loan or require a larger borrower contribution.

The Development Appraisal

A development appraisal brings together the project’s expected income, costs, timing and profit.

It may include:

• site purchase

• property taxes

• legal and professional fees

• construction costs

• contingency

• planning and building-control costs

• finance costs

• marketing and sales costs

• expected sale proceeds or investment value

• developer profit

• project programme

• cash-flow requirements

RICS describes development appraisal as an assessment that can test profitability or viability by comparing the finished scheme’s value with land, construction, professional, finance and other development costs.

The Appraisal Should Be Realistic

A lender may challenge:

• an optimistic GDV

• an inadequate contingency

• unrealistic build costs

• an unusually short programme

• underestimated professional fees

• sales assumptions

• insufficient finance costs

• a limited developer profit margin

The appraisal should also be stress-tested.

You should consider what happens if:

• construction costs increase

• the project takes longer

• the finished units sell for less

• sales take longer than expected

• the refinance valuation is lower

• additional equity is required

A development that only works under the most optimistic assumptions may be difficult to fund and risky to undertake.

What Do Development Lenders Assess?

A development lender may assess the following areas.

The Borrower

The lender may consider:

• identity and background

• property experience

• development experience

• credit history

• financial position

• available liquidity

• source of the borrower’s contribution

• business structure

• other projects and liabilities

The Site

The lender may review:

• current value

• purchase price

• legal title

• access

• planning status

• existing use

• environmental issues

• contamination

• flood risk

• utilities

• restrictive covenants

• rights of way

• neighbouring uses

The Proposed Scheme

The lender may consider:

• planning permission

• proposed units

• design and specification

• market demand

• construction method

• procurement route

• contractor

• professional team

• programme

• cost plan

• projected GDV

The Financial Appraisal

The lender may assess:

• borrower equity

• loan-to-cost

• loan-to-GDV

• expected profit

• contingency

• interest provision

• cash flow

• sensitivity to cost and value changes

The Exit Strategy

The lender will want a credible route for repayment.

This may involve:

• sale of completed units

• refinance

• another committed source of capital

A vague plan to “sell or refinance” without evidence may not be sufficient.

Your Experience as a Developer

Experience can be an important part of the lender’s assessment.

The lender may want to see evidence that you have successfully completed projects involving:

• similar construction

• a comparable number of units

• a similar project value

• the same intended use

• a comparable planning or conversion process

You may be asked for a schedule of previous projects showing:

• purchase price

• development costs

• completion date

• finished value

• sale or refinance outcome

• your role

• the professional team

• the lender used

Experience of the Wider Team

The lender may also consider the experience of:

• the main contractor

• architect

• project manager

• quantity surveyor

• structural engineer

• planning consultant

• sales agent

A strong professional team can provide reassurance, but it does not automatically compensate for an inexperienced borrower.

First-Time Developers

Development finance may be available to a first-time developer, but lender choice can be more limited.

The lender may place greater emphasis on:

• relevant property or construction experience

• the size and complexity of the project

• the borrower’s cash contribution

• the contractor’s experience

• the professional team

• the contingency

• the exit strategy

• personal financial strength

Start With a Manageable Project

A lender may be more comfortable with a first project involving:

• one property

• a straightforward conversion

• a smaller refurbishment

• a clear planning position

• a fixed-price or well-documented build contract

• an experienced contractor

• a strong equity contribution

A complex multi-unit ground-up development may be difficult to fund without a relevant track record.

Joint Ventures

A first-time developer may consider working with an experienced development partner.

The legal and commercial agreement should make clear:

• ownership

• responsibilities

• decision-making

• profit distribution

• additional funding obligations

• personal guarantees

• what happens if the project exceeds budget

• how the relationship can be ended

Independent legal and tax advice should be obtained.

Planning Permission and Building Regulations

Planning permission and building-regulations approval are separate requirements.

GOV.UK explains that planning permission may be needed for constructing a new building, making a major alteration or changing a building’s use. Building-regulations approval deals with technical construction standards, and a project can require both.

Planning Permission

The lender may want to review:

• the decision notice

• approved drawings

• planning conditions

• section 106 obligations

• Community Infrastructure Levy liabilities

• affordable-housing requirements

• listed-building consent

• change-of-use permission

• permitted-development evidence

• the deadline for commencing work

Conditions

Some planning conditions must be discharged before work begins.

Others affect:

• materials

• drainage

• landscaping

• highways

• contamination

• ecology

• construction hours

• occupancy

• parking

• access

The lender and monitoring surveyor may require evidence that relevant pre-commencement conditions have been discharged.

Building Regulations

Building-regulations approval may be required for construction, structural alterations and changes to building use.

The lender may expect:

• building-control approval

• inspections during construction

• completion certification

• warranties or professional certification

Planning permission does not replace building-regulations approval.

Funding a Site Without Planning Permission

Finance may be available for a site without full planning permission, but the lender will assess the additional planning risk.

A lender may offer:

• a lower loan

• a higher borrower-contribution requirement

• a shorter initial facility

• funding limited to acquisition

• conditions preventing construction drawdowns until planning is granted

• a structure designed to refinance once planning is obtained

Planning Risk

Planning permission may:

• be refused

• be delayed

• be granted for fewer units

• include expensive conditions

• require redesign

• reduce the expected GDV

• increase costs

The site value without planning may be substantially lower than its hoped-for value after consent.

RICS notes that development sites and land agreements can carry material planning risk, with land value often changing significantly once permission is granted or improved.

An Exit Without Planning

The lender will want to understand how it would be repaid if permission is not obtained.

Possible answers might include:

• sale of the site at its existing-use value

• refinance against the current property

• repayment from other assets

The exit must be credible and evidenced.

Development Valuations

The lender will normally instruct an independent valuation.

The valuer may be asked to report on:

• current market value

• market value with vacant possession

• value under existing planning

• GDV

• rental value

• development costs

• residual land value

• demand for the completed units

• sale period

• project risks

• value if the lender had to enforce its security

The instructions vary by lender.

The Valuation May Differ From Your Appraisal

If the valuer adopts:

• a lower GDV

• a higher cost allowance

• a longer sales period

• a lower current value

• a larger contingency

the lender may reduce the facility.

You may need to:

• provide more equity

• renegotiate the purchase

• reduce the scheme

• change the specification

• seek another lender

• decide not to proceed

A second lender is not required to accept your original valuation.

The Monitoring Surveyor

The lender may appoint an independent monitoring surveyor, sometimes called a project monitor.

The monitoring surveyor acts for the lender rather than the developer.

RICS describes the lender’s independent monitoring surveyor as a professional who assesses development risk and provides technical advice to the finance provider.

The Monitoring Surveyor May Review

• planning and approved designs

• site conditions

• professional appointments

• construction contracts

• project programme

• cost plan

• contingency

• cash flow

• insurance

• warranties

• progress on site

• drawdown requests

• remaining costs

• defects or delays

• completion

Homes England’s monitoring framework includes review of designs, budgets, procurement, ground-condition assumptions, project progress, cash-flow adequacy and the amount requested at each drawdown.

The Developer Usually Pays the Cost

Although the monitoring surveyor is appointed to protect the lender’s position, the borrower is commonly responsible for the fees.

These may include:

• an initial report

• site visits

• drawdown reports

• variation reviews

• completion reports

• additional visits if issues arise

The fees should be included in the development budget.

The Monitoring Surveyor Is Not Your Project Manager

The developer remains responsible for:

• managing the contractor

• controlling the budget

• checking workmanship

• complying with planning and building regulations

• managing health and safety

• delivering the project

The lender’s monitoring surveyor should not be treated as a replacement for your own professional team.

Conditions Before the First Drawdown

Before the lender releases acquisition or development funds, it may require a series of conditions to be satisfied.

These are often called conditions precedent.

They may include:

• signed facility documents

• registered security

• personal guarantees

• valuation

• monitoring-surveyor report

• planning permission

• discharged planning conditions

• approved drawings

• detailed cost plan

• construction contract

• professional appointments

• professional-indemnity insurance

• building insurance

• structural warranty arrangements

• evidence of the borrower’s equity

• evidence that required equity has been spent first

• proof of tax and legal matters

• bank account or payment-control arrangements

Homes England’s monitoring-surveyor guidance states that certification of appropriate project expenditure and works can be a condition before the first and subsequent drawdowns.

Do not assume the facility is ready to draw simply because a credit-backed offer has been issued.

The legal and technical conditions must also be completed.

Ground-Up Development

Ground-up development involves constructing a new building on a site.

This may include:

• a single house

• several houses

• apartments

• a mixed-use building

• demolition and reconstruction

The lender may pay particular attention to:

• planning permission

• demolition

• ground conditions

• foundations

• utility connections

• highways and access

• build contract

• contractor experience

• warranties

• contingency

• sales demand

• programme

Ground Conditions

Unexpected ground conditions can significantly affect costs.

Potential issues include:

• contamination

• made ground

• poor bearing capacity

• mining

• drainage

• groundwater

• retaining walls

• archaeology

• unexploded ordnance

• protected habitats

Appropriate site investigations and professional reports may be required.

Utilities and Infrastructure

The cost and timing of connecting:

• water

• electricity

• gas

• drainage

• telecommunications

• roads

should be understood before the lender approves the budget.

Delays in utilities can prevent practical completion or occupation even where the buildings themselves are substantially finished.

Conversions and Change of Use

A conversion may involve changing:

• a house into flats

• offices into apartments

• retail space into residential use

• a barn into a home

• a commercial building into mixed use

• an existing property into an HMO

The lender will want to understand:

• existing lawful use

• proposed use

• planning or permitted-development position

• building-regulations requirements

• structural alterations

• fire safety

• access and escape routes

• acoustic standards

• warranties

• lease or title structure

• expected finished value

Permitted Development

Some changes of use may fall within permitted-development rights, subject to conditions and prior approval.

Do not assume that a project is permitted without formal professional confirmation.

The lender and solicitor may require evidence establishing the lawful planning position.

Creating Separate Titles

Where a building is divided into several units, the legal structure must be considered.

This can involve:

• separate leases

• freehold and leasehold arrangements

• management companies

• service charges

• rights over common areas

• utility metering

• access

The exit lender or buyers’ mortgage lenders may have their own requirements.

Heavy Refurbishment

Heavy refurbishment may include:

• structural alterations

• significant internal reconfiguration

• extensions

• loft conversions

• replacement of major building elements

• complete services renewal

• work that leaves the property temporarily uninhabitable

The boundary between bridging finance and development finance can vary between lenders.

The key questions include:

• how much the work costs

• whether it is structural

• whether the property remains habitable

• whether funds need to be drawn in stages

• whether planning is required

• the expected end value

• the proposed exit

Light Refurbishment

A lighter project may involve:

• kitchens

• bathrooms

• decoration

• flooring

• non-structural improvements

This might be suitable for a bridging facility, subject to the lender and project.

Read our Refurbishment Finance guide.
Internal link: Refurbishment Finance, when published

Mixed-Use and Commercial Development

Development finance may also be considered for:

• shops with flats above

• office and residential schemes

• industrial redevelopment

• commercial-to-residential conversion

• hotel or serviced-accommodation projects

• care or specialist-use property

These projects can involve additional considerations such as:

• commercial leases

• pre-lets

• business plans

• operator experience

• planning use class

• VAT

• business rates

• environmental requirements

• investment yield

• specialist valuation

• exit-lender appetite

Mixed-use schemes can also create legal and title complexity where the completed units are to be sold separately.

Appropriate legal, valuation, planning and tax advice should be obtained.

Development Through a Limited Company or SPV

Many property developments are undertaken through a limited company or special-purpose vehicle, commonly called an SPV.

An SPV is generally a company established for a particular project or property activity.

The lender may review:

• company ownership

• directors

• shareholders

• articles of association

• Companies House records

• connected companies

• existing liabilities

• source of funds

• previous projects

• personal guarantees

A New Company Does Not Remove the Need for Experience

An SPV may have no trading history.

The lender will therefore assess the experience and financial position of the people behind it.

Company Charges

Where a company grants security over its property or assets, details of the charge may need to be registered at Companies House.

GOV.UK confirms that a company charge can include a mortgage over property used as security and that the relevant details must be registered.

Your solicitor and accountant should advise on the legal and company implications.

Personal Guarantees

A lender may require directors, shareholders or another party to provide a personal guarantee.

A personal guarantee is a legal commitment to repay some or all of the company’s debt if the company fails to meet its obligations.

Government guidance warns that providing a guarantee can expose the guarantor’s personal assets to claims.

Guarantee Limits

A guarantee may be:

• unlimited

• capped at a particular amount

• limited to a percentage

• supported by separate personal security

The facility documents should explain:

• the guaranteed amount

• when the lender can make a claim

• whether interest and costs are included

• whether several guarantors are jointly liable

• when the guarantee is released

Independent Legal Advice

A guarantor may be required or advised to obtain independent legal advice before signing.

Do not treat a personal guarantee as an administrative formality.

Its potential financial consequences should be understood fully.

Security Required by the Lender

The lender may require security including:

• a first legal charge over the development site

• a debenture over the borrowing company

• a charge over company assets

• personal guarantees

• share charges

• assignments of contracts, insurance or warranties

• security over another property

• restrictions on additional borrowing

The precise package depends on the project and lender.

Additional Security

A lender may request security over another property where:

• the development site has limited current value

• the borrower contribution is insufficient

• planning risk remains

• the lender requires additional comfort

Providing additional security places that property at risk if the facility is not repaid.

Independent legal advice should be obtained.

Your Financial Contribution

Development lenders normally expect the borrower to contribute funds or equity to the project.

This is often referred to as the developer’s equity, cash contribution or skin in the game.

The contribution may come from:

• cash savings

• equity in a site already owned

• retained business funds

• investor capital

• another secured facility

• a joint-venture partner

The lender will want evidence showing:

• where the money came from

• that it is available

• whether it must be repaid

• whether another party has rights over the project

• when it will be introduced

Equity First

Some lenders require the borrower’s contribution to be spent before lender development funds are drawn.

Others may fund proportionately.

The exact arrangement has a significant effect on cash flow.

Investor Funds

Where third-party investors are involved, the lender may request:

• investment agreements

• shareholder information

• repayment terms

• profit-sharing arrangements

• evidence of the investors’ funds

• confirmation of priority between the lender and investors

Legal and tax advice should be obtained.

Contingency and Cost Overruns

A development budget should include a contingency for unexpected costs.

The appropriate level depends on:

• project complexity

• condition of the existing building

• ground conditions

• design stage

• procurement method

• whether contracts are fixed price

• inflation and material costs

• planning conditions

The Lender’s Contingency Is Not Spare Profit

A contingency exists to protect the project against unexpected expenditure.

The lender may restrict how it can be used.

Cost Overruns

If costs exceed the agreed budget, the lender may require the borrower to fund the shortfall.

The lender is not automatically required to increase the facility.

Possible causes include:

• unforeseen structural work

• ground conditions

• material-price increases

• contractor failure

• design changes

• planning requirements

• utility costs

• delays

• professional fees

• inadequate original estimates

Cost to Complete

Throughout the project, the monitoring surveyor may assess whether the undrawn facility and remaining borrower funds are sufficient to complete the development.

If there is a shortfall, the lender may suspend future drawdowns until additional funds are provided.

Delays and Extension Fees

Development facilities have an agreed term.

Delays can arise from:

• planning conditions

• building control

• weather

• labour shortages

• material delays

• contractor failure

• utility connections

• sales

• legal-title issues

• refinancing

If the project is not repaid by the maturity date, the lender may:

• agree an extension

• charge an extension fee

• increase the interest rate

• impose additional conditions

• require partial repayment

• decline to extend

An extension is not guaranteed.

Build and Sales Periods

The facility term should allow sufficient time for:

• acquisition

• pre-start conditions

• construction

• snagging

• certification

• marketing

• sales or refinancing

• legal completion

An unrealistically short facility can create avoidable refinancing pressure.

The Exit Strategy

The exit strategy explains how the development lender will be repaid.

It must be realistic, evidenced and appropriate for the project.

Common exits include:

• selling the completed units

• refinancing the finished development

• a combination of sales and refinance

• repayment from another confirmed source

The Exit Must Match the Project

A project intended for sale should have evidence supporting:

• expected demand

• realistic sale prices

• marketing period

• sales costs

• target buyers

• mortgageability of the completed units

A project intended to be retained should have evidence supporting:

• expected rent

• occupancy

• operating costs

• completed value

• long-term lender affordability

• required loan-to-value

• the borrower’s experience

More Than One Exit

A secondary exit can provide resilience.

For example:

• primary exit: sell the completed units

• secondary exit: refinance and retain them

However, both must be credible.

A refinance exit should not be assumed merely because the project is expected to be worth more when completed.

The completed scheme must meet the exit lender’s criteria at that time.

Selling the Completed Development

Where the exit is sale, the lender may assess:

• expected unit values

• local demand

• competing developments

• estate-agent advice

• marketing period

• sales costs

• affordable-housing restrictions

• section 106 conditions

• warranties

• separate titles

• practical completion

• building-control certificates

Sales Below the Appraised Value

If units sell for less than expected, the lender may require a larger proportion of each sale receipt to reduce the facility.

The facility agreement may contain a sales-release price or another formula setting out how much must be repaid when each unit is sold.

Selling Before Completion

Off-plan or pre-completion sales may be possible, but buyers and their mortgage lenders will normally require appropriate legal documents, warranties and build progress.

The lender must consent to any sale and release of security.

Refinancing Onto a Longer-Term Mortgage

A developer may plan to retain the completed property and refinance onto:

• a buy-to-let mortgage

• a portfolio mortgage

• a commercial investment mortgage

• another longer-term facility

The refinance lender may assess:

• the completed value

• rental income

• tenancy or lease terms

• borrower income

• experience

• property type

• loan-to-value

• company structure

• personal guarantees

• credit history

Refinance Risk

A projected refinance is not guaranteed.

The eventual loan may be lower because:

• the finished value is below expectations

• rent is lower

• interest rates have changed

• lender criteria have tightened

• the property is not fully complete

• units are vacant

• title or warranty issues remain

• the borrower’s circumstances have changed

The development appraisal should allow for a realistic refinance amount rather than assuming all project expenditure can automatically be recovered.

Development Exit Finance

Development exit finance is short-term funding used when a project is complete or substantially complete but the original development facility is approaching its maturity date.

It may provide additional time to:

• sell completed units

• stabilise rental income

• complete minor remaining work

• arrange a longer-term refinance

• repay a more expensive development facility

The lender may require:

• practical completion

• building-control certification

• structural warranties

• completed titles

• a valuation

• a clear sales or refinance strategy

• limited remaining construction risk

Exit finance is still secured borrowing and may involve:

• interest

• arrangement fees

• valuation fees

• legal fees

• exit or early repayment terms

It should not be used to conceal a project that remains materially incomplete or financially unviable.

Read our Development Exit Finance guide.
Internal link: Development Exit Finance, when published

What Documents Might You Need?

The exact information depends on the project and lender.

You may be asked for the following.

Borrower Information

• identification

• proof of address

• personal or company bank statements

• asset and liability statements

• credit information

• company accounts

• management accounts

• details of other projects

• evidence of experience

• CVs for key individuals

• source-of-funds evidence

Site Information

• purchase contract

• title documents

• planning permission

• approved drawings

• planning-condition schedule

• site investigations

• environmental reports

• flood information

• access and utility details

• existing leases or tenancies

Development Information

• development appraisal

• cost plan

• project programme

• cash-flow forecast

• schedule of accommodation

• specification

• construction contract

• contractor information

• professional appointments

• warranty details

• insurance

• sales and rental evidence

• exit strategy

Professional Team

The lender may request information concerning:

• architect

• contractor

• quantity surveyor

• structural engineer

• project manager

• planning consultant

• solicitor

• sales agent

• managing agent

A well-prepared application can help the lender assess the project efficiently, although it does not guarantee approval.

The Development-Finance Process

Every transaction differs, but the process may follow these stages.

1. Initial Conversation

We’ll discuss:

• the site or property

• the purchase price

• planning

• proposed development

• experience

• project costs

• available contribution

• GDV

• programme

• exit strategy

2. Review the Initial Information

We’ll identify:

• whether the project appears suitable for development finance

• what information is missing

• likely lender considerations

• potential regulatory issues

• key risks within the proposal

3. Approach Suitable Lenders

Subject to the scope of our service, we’ll present the project to relevant lenders.

The lender may provide:

• an initial indication

• heads of terms

• a decision in principle

• requests for further information

An initial indication is not a binding commitment to lend.

4. Compare the Terms

We’ll help you consider:

• facility amount

• loan-to-cost

• loan-to-GDV

• interest

• arrangement fees

• exit fees

• monitoring fees

• legal and valuation costs

• personal guarantees

• drawdown conditions

• facility term

• extension terms

• exit requirements

5. Submit the Full Application

The lender may complete:

• credit assessment

• background checks

• valuation

• monitoring-surveyor review

• legal due diligence

• planning review

• cost assessment

6. Formal Offer and Facility Documents

If approved, the lender and its solicitors will issue the formal facility and security documents.

You should obtain appropriate independent legal advice.

7. Complete the Conditions Precedent

Before funds are released, all required legal, technical and financial conditions must be satisfied.

8. Initial Completion

The lender releases the agreed acquisition or refinance funds, subject to the terms.

9. Construction and Drawdowns

Work progresses and development funds are drawn in stages.

The monitoring surveyor reports to the lender throughout.

10. Completion of the Development

The lender may require:

• practical completion

• building-control approval

• warranties

• final monitoring report

• completed titles

• confirmation of any remaining work

11. Exit and Repayment

The facility is repaid through sale, refinance or another agreed source.

Security is released once the lender has received the amounts due and the legal requirements have been completed.

Tax, VAT and Professional Advice

Development finance can interact with complex legal and tax matters.

Moveo Mortgages does not provide tax, legal, planning, valuation or construction advice.

You should obtain appropriate professional advice regarding matters such as:

• Stamp Duty Land Tax or equivalent property tax

• VAT on land, construction and professional fees

• capital gains

• corporation tax

• income tax

• company and SPV structure

• joint ventures

• investor agreements

• planning

• building regulations

• construction contracts

• warranties

• health and safety

• leases and title structure

HMRC’s construction VAT guidance explains that the VAT treatment of building work and materials can vary according to the type of project and supply.

Do not assume that all construction expenditure can be recovered or treated in the same way.

Your accountant or tax adviser should confirm the position before the financial appraisal is finalised.

Key Risks of Development Finance

Property development and development finance involve significant financial risk.

Cost Risk

Construction and professional costs may exceed the original budget.

The lender may require you to fund the shortfall.

Valuation Risk

The site or completed development may be valued below your expectations.

This can reduce the loan and project profit.

Planning Risk

Permission may be delayed, refused or granted with costly conditions.

Construction Risk

The project may experience:

• defects

• contractor failure

• material shortages

• ground problems

• delays

• design issues

Sales Risk

Completed units may take longer to sell or achieve lower prices.

Refinance Risk

The expected long-term mortgage may not be available on the amount or terms anticipated.

Interest and Fee Risk

A delay can increase:

• interest

• monitoring fees

• professional costs

• extension charges

• holding costs

Security Risk

The lender may enforce its security if the facility is not repaid or the agreement is breached.

This could include the development property and any additional property provided as security.

Personal-Guarantee Risk

A guarantor may become personally liable if the borrowing company cannot repay the debt.

Regulatory Status

The regulatory status of development finance depends on the borrower, the security and the intended use of the secured property.

Under the FCA definition, a regulated mortgage contract involves credit to an individual or trustees secured on land where at least 40% is used or intended to be used as a dwelling by the borrower or a related person. Many corporate or wholly commercial development facilities fall outside that definition, but each transaction must be assessed individually.

Do not assume that a facility is regulated or unregulated based only on the label “development finance.”

Why Choose Moveo Mortgages?

Development-finance applications can involve lenders, valuers, solicitors, monitoring surveyors, contractors and several other professionals.

Our role is to help you understand and navigate the finance process.

We Start With the Project

We’ll take the time to understand:

• the property

• planning

• experience

• costs

• borrower contribution

• GDV

• cash flow

• exit strategy

We Help Identify the Information Lenders Need

A clear and well-organised proposal can help lenders assess the transaction.

We’ll explain which documents and project details are likely to be required.

We Consider More Than the Headline Rate

Development-finance costs can include:

• interest

• arrangement fees

• exit fees

• valuation

• monitoring

• legal costs

• extension fees

• commitment or non-utilisation charges

We’ll help you consider the full structure rather than one quoted percentage.

We Explain the Drawdown Process

You should understand:

• when funds are available

• whether costs are funded in advance or arrears

• the role of the monitoring surveyor

• which conditions must be satisfied

• what happens if costs increase

We Focus on the Exit From the Beginning

A credible exit is essential.

We’ll discuss the intended sale or refinance before the facility is arranged, rather than waiting until the development is nearly complete.

We Keep You Informed

We aim to respond to enquiries within 24 hours and provide clear updates as the finance application progresses.

Development Finance Across the UK

Moveo Mortgages can discuss property-development finance for suitable projects across the UK, subject to lender availability, project type and the scope of our service.

Projects may include:

• residential development

• conversions

• refurbishment

• mixed-use schemes

• development exit finance

• selected commercial projects

We also provide local property-finance information across Manchester, Cheshire and the surrounding areas.

Explore our location guides:

• Mortgage Broker Manchester
  Internal link: Mortgage Broker Manchester

• Mortgage Broker Cheshire
  Internal link: Mortgage Broker Cheshire

• Mortgage Broker Altrincham
  Internal link: Mortgage Broker Altrincham

• Mortgage Broker Hale
  Internal link: Mortgage Broker Hale

• Mortgage Broker Wilmslow
  Internal link: Mortgage Broker Wilmslow

• Mortgage Broker Didsbury
  Internal link: Mortgage Broker Didsbury

• Mortgage Broker Sale
  Internal link: Mortgage Broker Sale

• Mortgage Broker Knutsford
  Internal link: Mortgage Broker Knutsford

• Mortgage Broker Alderley Edge
  Internal link: Mortgage Broker Alderley Edge

Frequently Asked Questions

What is development finance?

Development finance is short-term secured funding used for property construction, conversion or substantial redevelopment.

Is development finance the same as a bridging loan?

No.

Bridging finance is generally used to fund a short-term purchase or relatively straightforward project, while development finance commonly includes staged construction drawdowns and ongoing project monitoring.

Can development finance fund the site purchase?

Potentially.

A lender may fund an agreed proportion of the acquisition alongside a facility for development costs.

Can it fund 100% of the purchase and build costs?

Potentially only in limited circumstances, usually where additional security or substantial existing equity is available.

Most lenders expect a meaningful borrower contribution.

How much can I borrow?

The amount depends on:

• site value or purchase price

• development costs

• GDV

• borrower contribution

• experience

• planning

• exit strategy

• lender criteria

What is GDV?

GDV means gross development value—the estimated value of the completed development.

It is an estimate rather than a guaranteed future sale value.

What is loan-to-cost?

Loan-to-cost compares the facility with the eligible cost of the development.

The precise cost definition varies between lenders.

What is loan-to-GDV?

Loan-to-GDV compares the facility or peak debt with the projected completed value.

Will the lender fund all construction costs?

Potentially, subject to the overall leverage limits, cost assessment, borrower contribution and facility structure.

The borrower may still need to fund VAT, professional fees, contingency or other costs.

Are construction funds released upfront?

Usually not in full.

Development funds are commonly released through staged drawdowns as work progresses.

What is a monitoring surveyor?

A monitoring surveyor is appointed to advise the lender on the project, costs, progress and drawdown requests.

The surveyor acts for the lender rather than as the developer’s project manager.

Who pays the monitoring surveyor?

The borrower is commonly responsible for the fees, although the appointment protects the lender.

Do I need planning permission before applying?

Not always.

Some lenders may fund sites without full planning, but leverage can be lower and the planning risks must be addressed.

Can I fund a property under permitted development?

Potentially.

The lender and solicitor will require appropriate evidence that the intended work and use are lawful.

Do I need building-regulations approval?

Potentially, depending on the work.

Planning permission and building regulations are separate requirements.

Can a first-time developer obtain finance?

Potentially.

Lender choice may be more limited, and greater emphasis may be placed on the professional team, project simplicity, equity contribution and relevant experience.

Do I need to use a limited company?

Not in every case.

However, many developments are undertaken through limited companies or SPVs.

Legal, tax and regulatory advice should be obtained.

What is an SPV?

An SPV is a special-purpose vehicle, commonly a limited company created for a particular property activity or project.

Will I need to provide a personal guarantee?

Possibly.

The requirement and guarantee amount depend on the lender and transaction.

Can the lender take security over my home?

Potentially, where additional security is offered or required.

This would put the property at risk if the facility were not repaid.

Independent legal advice should be obtained.

What is a development appraisal?

It is a financial assessment of the scheme’s costs, completed value, timing, finance and expected profit.

How much contingency should I include?

The appropriate amount depends on the project.

The lender, quantity surveyor and monitoring surveyor may require a higher allowance where the project is complex or the costs are uncertain.

What happens if the build costs increase?

The lender may require you to fund the shortfall.

It is not automatically required to increase the facility.

Can I change the development after funding is agreed?

Material changes may require approval from:

• the lender

• monitoring surveyor

• valuer

• planning authority

• building control

Do not make significant changes without considering the facility requirements.

What happens if the project is delayed?

Additional interest, monitoring costs and extension fees may apply.

The lender is not guaranteed to extend the facility.

Can interest be added to the loan?

Potentially.

Depending on the lender, interest may be retained, rolled up or serviced monthly.

Is interest charged on the full facility?

This depends on the lender.

Interest may be charged on drawn funds, while separate fees may apply to undrawn amounts.

What fees apply?

Potential costs can include:

• arrangement fees

• interest

• exit fees

• valuation

• monitoring surveyor

• legal fees

• broker fees

• extension fees

• commitment fees

Can I repay the loan by selling the completed units?

Potentially.

The lender will assess the projected demand, values, sales period and legal structure.

Can I retain and refinance the finished properties?

Potentially.

The completed scheme and borrower must meet the exit lender’s criteria at the time of refinancing.

What is development exit finance?

It is short-term funding used to repay a development facility once the project is complete or substantially complete, providing time for sale or longer-term refinancing.

Can I finance a partly completed development?

Potentially.

The lender will assess the work completed, remaining costs, reasons for the previous funding position and ability to finish.

Can I finance a conversion into flats?

Potentially.

Planning, building regulations, fire safety, title structure, construction costs and exit demand will be assessed.

Can I fund a commercial-to-residential conversion?

Potentially.

The planning or permitted-development position, existing building, proposed units and exit strategy will be important.

Can I fund a mixed-use project?

Potentially.

Mixed-use developments may require specialist valuation, planning, lease and exit consideration.

Can I use development finance for refurbishment?

Potentially.

The appropriate product will depend on whether the work is light, heavy or structural and whether staged drawdowns are required.

Can I purchase at auction using development finance?

Potentially, but auction completion deadlines can be short.

A bridging facility may sometimes be used for the acquisition before development funding is completed.

Is development finance regulated by the FCA?

It depends on the borrower, security and intended use.

Many business and corporate development facilities fall outside regulated mortgage rules, but a transaction may be regulated where the legal conditions for a regulated mortgage contract are met.

The regulatory position must be checked for each case.

How long does the application take?

Timescales vary according to:

• project complexity

• information quality

• valuation

• monitoring report

• legal work

• planning

• lender process

Do I need a fixed-price construction contract?

Not always, but the lender will want confidence in the cost plan, procurement route, contractor and ability to manage cost risk.

Can the lender decline after issuing terms?

Yes.

Initial terms or an agreement in principle remain subject to full underwriting, valuation, legal work, monitoring and satisfaction of the lender’s conditions.

Can Moveo guarantee the finance?

No.

Every application is subject to lender assessment, project due diligence, valuation, legal work and final approval.

Ready to Discuss Your Development?

You do not need to know exactly which lender, facility structure or drawdown arrangement you need before speaking to us.

That is what the first conversation is for.

Whether you are:

• acquiring a development site

• constructing new homes

• converting a building

• completing a substantial refurbishment

• undertaking your first project

• developing through an SPV

• refinancing a part-completed scheme

• approaching the end of an existing development facility

• planning to sell the finished units

• intending to retain and refinance the development

we’ll take the time to understand the project and explain the relevant finance options.

No unnecessary jargon.

No guarantee that funding will be available.

Just clear, personal guidance to help you understand the facility, costs, risks and next steps.

Move forward with Moveo.

Helping you make informed property-finance decisions with confidence.

Discuss your development project
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Internal link: Contact page

SEO Details

Suggested URL

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Meta Title

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Meta Description

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Regulatory Wording

Replace the placeholders below with the precise wording approved by your principal or network before publication:

[Moveo Mortgages is a trading style of FULL LEGAL ENTITY NAME, an Appointed Representative of PRINCIPAL FIRM NAME, which is authorised and regulated by the Financial Conduct Authority. FCA reference number: NUMBER.]

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