- 20th September 2022
- Posted by: DMM
- Category: Development exit loans
What is a Development Exit Loan?
There are many reasons why a property developer may need to move on quickly from a project and a development exit loan can provide financial flexibility. A development exit finance can enable developers to release equity to secure a new opportunity, clear an existing loan where the term is coming to an end or simply take out a lender that is no longer wanted.
Whatever the reason, an exit loan can be used on partly completed projects but, in reality, the most attractive terms will be for a site nearing PC or fully completed.
As an example, development facility may have been used to construct a block of ten apartments. Let’s say six have been successfully sold with debt paid down against the facility but four are yet to complete. Until these remaining four units are sold then the development facility cannot be fully repaid and, if the term is getting close to an end, the developer may be at risk. Development finance is a secured loan and whilst some lenders may extend their term, this could be expensive and may not be guaranteed.
“Headline development exit loan rates can start from as low as 0.39% but this may often be for an initial term”
Development Exit Loan Rates
As such a development project nears the end, the risk to a new lender is much reduced and, consequently, better interest rates can be achieved.
Headline development exit loan rates can start from as low as 0.39% but this may often be for an initial term, say 6 months, so it is important to check the overall cost. Fixed rates can start at around 0.48% and for terms up to 18 months.
In such an example then a development exit loan may provide a solution to both repay a more expensive loan and provide the additional time needed to complete all sales. A further advance can be gained with development exit loans that can be repaid early without penalty. Just what you need when the sales progression goes to plan!
This type of finance can also be put in place quickly with indicative terms within 24 hours and completion sometimes as fast as two weeks.