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With property development you often require significant upfront funding long before any return has been realised. Making sure you access the right finance can make the difference between a stalled plan and a build being successful. This is the case whether you are taking on your first development or adding another project to an already existing portfolio,
A £350,000 bridging loan can provide developers with the level of funding that they need to purchase, refurbish or develop a property in an efficient manner.
If you are looking to take out a £350,000 property development loan then make sure to read our post on how this type of finance works, why it may be needed, and what you should consider before you apply.
What do you payback on a £350k bridging loan?
| Borrowing £350: development bridge | Repayment notes |
|---|---|
| Purchase Price (Security Property) | £460,000 |
| Loan Requested | £350,000 |
| Term | 10 months |
| Net LTV | 76.1% |
| Interest Rate | 1.25% per month |
| Monthly Interest | £350,000 × 1.25% = £4,375 |
| Total Interest (10 months) | £4,375 × 10 = £43,750 |
| Lender Arrangement Fee (1%) | £350,000 × 1% = £3,500 |
| Loan Amount | £350,000 |
| Arrangement Fee | £3,500 |
| Total Interest | £43,750 |
| Total to Repay | £350,000 + £3,500 + £43,750 = £397,250 |
What is a £350,000 property development loan?
A £350,000 property development loan is a specialist finance product designed to fund residential or mixed-use development projects. The loan can be used for ground-up builds, conversions, major refurbishments or property improvements that you intend to sell or refinance.
This loan size is usually short to medium term, often ranging from 6 to 24 months, those loan terms that exceed 12 months often need a payment plan in place. The interest is typically charged monthly and may be rolled up and paid at the end of the term. Development loans are commonly secured against the property that you are developing, additional security is sometimes required.
Why would a developer need a £350,000 loan?
Property development is capital intensive, with costs being incurred well before the development is complete. A loan of this size can support several key stages of a project.
1. Purchasing a development property
A developer will often need fast access to funds in order to secure a property at auction or complete a purchase quickly. A £350,000 loan can help to cover acquisition costs, this is especially helpful when compared to traditional mortgages is they are often too slow or restrictive.
2. Funding build and refurbishment costs
Construction, materials, labour and professional fees can quickly add up. By taking out development finance you can release the funds you need in stages, aligned with the progress of the build. By doing this you can make sure you get the cash when you need it.
3. Bridging gaps in project funding
Even the most experienced developers can face cash flow gaps during a project. A development bridging loan helps to cover these shortfalls whilst making sure there are no delays in work or without putting strain on your personal finances.
4. Supporting multiple units or larger projects
A £350,000 bridging loan can be sufficient to fund conversions, extensions or the creation of multiple residential units, this is commonly done outside of major city centres.
What can a £350,000 development loan be used for?
Property development loans are usually used for the following:
- Purchasing land or property for development
- Construction and refurbishment costs
- Professional fees, including architects, surveyors and planning consultants
- Labour and materials
- Contingency funding for unexpected costs
Before you choose a lender it’s important to know that they will expect a clear breakdown of how the funds will be used, they will also require a detailed development plan.
How are property development loans structured?
Development loans are structured differently from standard mortgages, so it’s important to know the differences
- Loan term: Typically 1 to 12 months (24 months can be made available with a payment plan in place)
- Interest: Charged monthly, often rolled up and paid at the end of the loan
- Drawdowns: Funds are released in stages as your development progresses
- Security: The loan is secured against the property, sometimes requiring additional assets
A bridge loan is usually repaid via the sale of the completed development project or by refinancing onto a longer-term mortgage.
What do lenders look for?
Before a lender approves a £350,000 property development loan, a lender will always assess:
- The viability of the project and exit strategy you have in place
- The status of the planning permission
- Development experience (or the professional team you have in place)
- Gross development value (GDV)
- All of your build costs and contingency allowances
Making sure that you have a well-prepared proposal and realistic financial projections can significantly improve your approval chances.
Risks and considerations
Although property development finance can be highly effective and incredibly useful, it is not without risk.
- Delays or cost overruns can impact the profitability of your project
- Market changes can affect the sale value
- Interest and fees can be higher than those of a standard mortgage
Although many might see the above points as negative as long as you have built in a contingency place, work with reputable professional and make sure your exit strategy is achievable, your project will move forward with ease.
Is a £350,000 development loan right for your project?
When used correctly, a £350k development bridging loan allows developers to move quickly, manage cash flow effectively and maximise their returns.
This type of finance should always be approached with careful planning. Make sure you always understand the costs, risks and the repayment strategy you have in place, all of this is key to a successful outcome for your development project. If you can tick all of these boxes a £350,000 development loan could be the right solution to help turn your plans into a reality.