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Property development finance rates.


Finance rates for property development range from 0.4% Per annum right up to as much as 12 % the defining factors of what rate you are able to achieve are really based on many factors, these include  the type of development, i.e houses, flats, commercial or mixed residential and commercial, generally speaking, residential houses and flats will always get the cheapest rates, the reasons for this are that they are easier to sell and do involve having to find a tenant as with any commercial or part commercial project. With an element of commercial attached to the development then a lender will almost always not agree to fund the project without a forward lease or sale agreement being signed, this means that an investor will be interested in buying the finished development, also on commercial the strength of the tenant taking out the lease will always be a contributing factor.


Development finance rates for houses.


Houses will always get the best interest rates for development funding, the reasons for this are that lenders are far more comfortable with the ability to resell houses should a borrower default then they are easier to sell as there are many more buyers than with any scheme that involves a commercial element to it. They are also more inclined to offer better rates if the houses are family homes, the only thing that could affect this if the properties are at a very high value or in any way different think architect designed one-off properties or anything that is too modern or in any way out of the ordinary. Schemes of 1-5 units being the most attractive, if there are too many plots on one site then there will be a longer sales period in order to sell all of the houses, as at any given time there will only be so many buyers looking for the type and style of property in your location.


Development finance interest rates for flats.


Flats will usually attract a higher interest rate than houses unless they are in a location that also has a number of flats that have sold and the location supports buyers who are looking for this type of property. One of the main drawbacks with apartments is that usually, you will have to build the whole block before you can sell even one of them, so projects usually have to be small think 1-6 units any more and if sales stall you have had to build the whole block and as a result you will be paying interest on the whole block until they have all sold, with houses you can just build them as you achieve a  sale and then move on to the next one and so forth. If there are more than 6 then it helps if they are in separate blocks although this is not always possible.


Property Development finance rates for mixed commercial residential.


Interest rates for this type of development are based on the mix of residential and commercial element, as a rule of thumb if the commercial portion is less than 40% then it is considered a residential development, although a lender will usually still want a good idea of how you intend to sell the commercial part of the development either by a forward sale or lease agreement with a strong covenant, this type of development also tends to include flats with the commercial element on the ground floor where flats can have less value than those on the first and floors above ground level. Interest rates for this type of development are usually higher than houses or flats, in most cases as they are more complicated to sell and the unknown factor on the commercial element of the project, also as with flats you have to build the whole scheme before you can sell a single unit you can use our calculators here.


Property Development finance rates for commercial properties.


Commercial properties whatever they are shops, hotels, industrial units, care homes or any other type of commercial properties are the ones that will normally attract the highest finance rates, this is because of the specialist nature of the property and a lender will need to see a strong exit strategy before they will even consider finance. This will either be an exchange of contracts from a potential buyer or a lease agreement signed and very often an investor who is prepared to agree to a purchase based on the covenant. This is the riskiest type of property development and only a handful of lenders will look to offer finance. Most smaller developers will just concentrate on residential rather than this specialist area.


Finance rates based on location.


Location also plays a key role in the finance rates on offer, the quicker a property will sell the better the rates you will receive, this can vary depending on how well a location is doing, if for instance London and the South East is selling well then lenders feel more comfortable and will offer competitive rates, if however the Midlands and north-west are performing better than these  the reverse will apply. As always lenders are looking for the best return on their capital with the best option to turn around the loan.