Development Exit Finance; what is it?!

We are often asked what is Development Exit Finance and how can it help my project? Essentially, Development Exit Finance is a short-term loan facility provided by specialist property lenders against project that have reached practical completion.

This type of property finance may be used by a developer to refinance out a more expensive senior or stretch development loan and enable more time to complete necessary sales. Development exit finance might also be used to release capital for use on a new project.

This type of finance may be used by a developer to refinance out a more expensive senior or stretch development loan and enable more time to complete necessary sales

Typical Lending Criteria for Development Exit Finance

The criteria for lending will, of course, vary from lender to lender but typically the loan to value (LTV) will not exceed 75% and practical completion will have been reached. 100% LTV may be possible with some lenders where additional security can be provided.

Because the lender is securing their facility with a 1st charge against a completed property development, other typical lending criteria may more relaxed than other loan products. Afterall, there is no longer any risk to construction issues, the principle risk is now usually the sale of the remaining properties. Consequently, many ranges of borrower profiles and property types may be considered but repayment terms may be limited to 24 months and a max GDV. Development exit finance will start with facilities of £100,000 and might go as high as £50 million.

Raising Development Exit Finance

Raising exit finance is straight forward with the lender assessing their loan based on a new formal valuation and can be completed quickly.

Arrangement and other lender fees (such as valuation, legal and exit fees) will be included in the loan which will usually be on a rolled-up basis meaning that the capital and interest is repaid as the property units are sold. Interest rates will differ from lender to lender and will depend upon the LTV but will start from around 0.44%pm. Where is development project has commercial elements then interest rates may be higher.

Developer Money Market offer an online loan comparison for developers seeking funding including exit finance.  To compare property development finance simply click here!

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