How To Finance Property Development The Easy Way

By: Sean Horton

The easiest way to learn how to finance property development is to go online with a specialist website. A website such as this will offer all the information needed for you to understand what you are taking on and how to get the best deal. By choosing to go with a broker when it comes to taking out borrowing you can save time and money even with the fees that you will have to pay.

Property development finance can be taken out as commercial or residential loans depending on the project. Each will be based on the individual's circumstances which will determine how much you will pay when it comes to the interest rates. Interest rates will usually fall between 1.5% and 2.5% above the base rate which is set out by the Bank of England. Factors which are taken into account when setting the rate will include the experience one has when it comes to property development. They will also be based on the industry sector at the time and the proposal you are putting forward for the loan.

A broker will be able to explain and work out a proposal with you which includes the valuation of the property you are interested in. Lenders will be able to work quicker if a broker has helped to set out the proposal and it has been validated. This will also get the project off to the best start possible and make things go more smoothly. Learning how to finance property development is not the easiest of things to understand and it is essential you take all the advice you possibly can.

When it comes to amount a lender will allow you to borrow then this will be based on the loan to project costs. These are influenced by the gross property development values which are projected. However you can expect around 70% to 75% of the price of purchase and the costs of building. Some lenders are prepared to give 100% funding but you will have to meet certain criteria and have an excellent track record in property development.

Usually the amount you will need to borrow will be in the region of hundreds of thousands of pounds and due to this lenders offer an interest only loan. What this means is that you will borrow the amount and then pay only the interest which this accumulates over the term of the loan. However the capitol will have to be repaid in full once the loan had come to full term. The lender will usually ask for proof that you have the means of paying this before signing off the loan. You can take a repayment loan but the repayments will be significantly higher than those of an interest only loan. However the advantage to this is that you will pay off the total of the loan over the term you take it out for. Each repayment will take a little off the interest and the capital.

These are just some of the reasons why it imperative to get all the help you possibly can when it comes to learning how to finance property development the easy way. Other factors which you have to consider include choosing between a fixed and variable rate of interest and making sure additional costs have not been included in the cost of the borrowing.

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