Funding Space - Development Finance Brokers
Funding Space are a team of finance professionals specialising in development finance for the care home sector. Our expertise lies in providing tailored financial solutions that cater to the unique needs of care home operators, from small family-run homes to large corporate entities.
Our services include sourcing and arranging development finance for a variety of purposes, such as new construction, expansion, renovation, or even starting a new care home. We understand the financial challenges that care home operators face, and we’re here to help you overcome them with our bespoke finance solutions.
With our extensive network of lenders and our deep understanding of the care home industry, we’re able to secure competitive rates and flexible terms for our clients. Our commitment to personalized service means we work closely with you to understand your needs and find the best possible solution. Let us be your trusted partner in securing the development finance you need to grow and sustain your care home.
Welcome to our Specialist Care Home Development Finance Brokerage!
Embarking on property construction, conversion, or heavy refurbishment projects demands a nuanced understanding of property development finance. This guide aims to clarify the intricacies surrounding property development loans, offering care home owners, managers, and finance directors valuable insights.
What is Property Development Finance?
Property development finance, often dubbed development finance or property development loans, facilitates the funding of construction, conversion, or substantial refurbishment projects on a short-term basis. Typically, repayment occurs through property sale proceeds or refinancing with options such as buy-to-let mortgages.
This form of financing caters to individuals, partnerships, trading businesses, limited companies, limited liability partnerships, and SPV limited companies, extending its reach to overseas investors pursuing UK-based projects.
By allowing substantial borrowing, property development finance enables the undertaking of more extensive projects, minimizing the need for significant personal capital investment. Leveraging borrowed funds intelligently can enhance financial returns on investment.
Application Process: A Closer Look
Once accepted, property development finance is usually released in stages. The initial tranche covers site acquisition or refinancing existing debt, with subsequent releases occurring at intervals during the construction process. Cash release stages are predetermined based on project milestones outlined in the application.
Transparent communication with the lender is crucial, especially if deviations from the original plan occur. The application process typically takes around six weeks, and applicants with tight timescales should inform their advisers to expedite paperwork filing.
While some lenders may require periodic payments during the loan term, this is uncommon. Generally, interest payments align with the final loan repayment.
Restrictions and Eligibility Criteria
Property development finance is typically contingent on the site having full planning consent. Funding limitations are influenced by the extent of planned work, with a focus on increasing floor space by 40% or more. Lenders usually cap the initial payment at two-thirds of the property value, and the overall loan is restricted to 80%-90% of the total project cost or 60%-70% of the gross development value upon completion.
Interest Rates and Associated Fees
Interest rates on property development finance vary based on project risk, with lower rates favored for financially sound applicants with a solid track record. However, the lowest rate doesn't always equate to the best option; consideration of various fees is crucial. Common fees include:
Arrangement Fee: Typically 1%-3% of the total project cost, added to the loan and repaid at the term end.
Broker Fees: Up to 2% of the loan amount, usually charged upon project completion.
Exit Fees: Due at the loan's end, upon refinancing or sale.
Non-Utilisation Fees: Applicable to any agreed but unused loan portion.
Valuation Fee: Covering surveyor site visits and report compilation.
Legal Fees: Liable for both lender and applicant costs.
Property Development Finance FAQs
Can I get a loan to cover 100% of the costs?
Yes, through joint venture funding or providing additional security as a deposit.
Which type of lender is best for me?
High street banks, challenger banks, and specialist lenders offer varying pros and cons. Choice depends on risk tolerance and specific project needs.
What's the benefit of working with a broker?
Brokers leverage expertise to match applicants with suitable lenders, saving time and reducing stress.
Will I be penalized if I'm a first-time developer?
Not necessarily; competitive options exist for first-time developers. Research is key.
What if I've had a troubled credit history?
Lenders consider circumstances behind credit issues. Transparency enhances approval chances.
Can I get a new loan if a job is part-completed?
Possible, but challenging. Lenders may be cautious without proper documentation.
What are the biggest risks?
Property development can be profitable but unpredictable. A steep learning curve and unforeseen challenges are part of the journey.
Navigating the realm of property development finance requires meticulous planning, transparency, and leveraging expert guidance. Careful consideration of project details and collaboration with experienced advisers ensure a smoother journey in the complex landscape of property development loans.
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