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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 13th October 2020*

We’re often approached by customers who want to know how to find the right property development finance broker for their needs and circumstances, so we’ve put together this article explaining what you should look for in an advisor and how to go about getting one.

The following topics are covered below…

The lending criteria for development finance is complex and vast. Many brokers lack experience in this product type, but luckily for you, the brokers we work with are highly knowledgeable and experienced professionals with access to the whole of the market. The advisors we work with will find the right lender for you – call us on 0808 189 2301 or make an enquiry to get started.

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Why do I need a specialist development finance broker?

If you’re in the market for development finance, you should always seek specialist advice before proceeding. Since the market is vast and most brokers have little experience in this product type, using one who doesn’t specialise in development finance comes with the risk of missing out on the most favourable deals available to a borrower in your circumstances.

Development finance loans are always assessed on a case-by-case basis, and the whole-of-market advisors we work with know exactly what lenders look for in a lender and can help pair you with the provider best positioned to offer you a table-topping deal.

Residential development finance brokers

As most development finance loans are arranged on an unregulated basis in order to be tailored to the needs of the individual, the majority of brokers in this sector do not arrange loans for residential purposes. However, we have access to specialist advisors who can.

Since Financial Conduct Authority (FCA) permissions are harder to obtain for residential development finance, the lenders who do offer these loans often insist on caveats to lessen the risk they’re taking on, such as a maximum term length of just 12 months.

With whole-of-market advice, it may be possible to find a lender who offers favourable rates on residential development finance, as long as you have a viable exit strategy (this would most commonly be a remortgage or the sale of the property post-completion).

Moreover, those with the means and expertise to build a residential property to their own specifications might find that a self-build mortgage is an equally viable (if not, more viable) funding option – the experts we work with can also offer advice on these products and help you find a lender. 

Commercial development finance brokers

Commercial development finance lenders are positioned to offer loans on an unregulated basis, which is nowhere near as dodgy as it sounds. ‘Unregulated’ lending is essential for commercial loans, as they usually need to be bespoke and tailored to the borrower.

It’s highly recommended source a commercial development finance broker if you’re after the funds to bankroll the construction of a business property, whether it’s a retail unit, a factory, a leisure venture or any other type of commercial premises. The brokers we work with can give you expert advice on these sectors and pair you with lenders who specialise in them.

What other types of property development loan brokers are there?

While development finance brokers can be broadly divided into two types: residential and commercial, there are brokers in these categories who specialise in certain niches.

Such as…

  • Bad credit development finance brokers: Bad credit is usually only a deal-breaker in development finance if it puts the exit strategy at risk, but some lenders might feel that your adverse drives up the level of risk. With this in mind, it’s important to seek a specialist bad credit broker to ensure you end up with the best deal.
  • Development finance brokers for first-time developers: Some lenders will only offer their best rates to borrowers with a strong track record in the relevant industry, especially if it’s a complex development project. Specialist advice is essential to find the lender offering the best rates for first-time developers.
  • 100% LTV development finance lenders: Most development finance lenders would offer to lend 70-75% of the funds needed for the initial purchase and 100% of the development capital, released in stages. However, there are brokers who can arrange deals with a 100% loan to value (LTV) ratio for borrowers in a position to put up extra security (usually properties or assets they own and hold equity in) or those who are happy to strike up a profit share agreement with the lender.
  • International development finance lenders: There are a small number of development finance providers who lend internationally, in countries including the US, Australia and across Europe. So if you are looking for a development finance broker for a project in Melbourne, for example, the advisors we work with can help.

Can I get a development finance broker anywhere in the UK?

Development finance brokers operate up and down the UK, but might be harder to come by in parts of Scotland and Northern Ireland since fewer lenders will offer capital for projects in areas such as the Scottish Highlands or away from the UK’s mainland.

So, for example, if you’re looking for property development finance brokers in London, you will have a wider pool to choose from than a borrower who needs one in rural Ireland. But if you make an enquiry, you can rest assured that the advisors we work with will pair you with the lender offering the best rates based on the location of your scheme.

Development finance broker fees

In addition to interest, arrangement, valuation and other costs, development finance borrowers usually have broker fees to foot. Most brokers charge a fee for arranging the loan and this will most likely be a percentage of the loan – around 1% is standard.

Many brokers charge an upfront fee and it’s fair to do this as it takes a lot of their time to arrange development finance, make sure though that their fees are refundable should they fail to obtain the finance for you.

The brokers we work with will also flag up the overall cost of the deal for you and will make sure you aren’t stung by any hidden charges.

Get specialist development finance advice from an expert broker

If you have questions and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0808 189 2301 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 13th October 2020
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.