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Property development [Finance|funding|mortgages}
Submitted by Koterie22
Tue, 12 Feb 2013
Financing a brand new build / Self BuildIf you're a novice to Property development you will struggle to find finance to perform your 1st project. Lenders prefer to see a 'track record' of development before they will consider any financing. One way around this would be to supply a lot more than the usual deposit. If you are looking to buy land with planning, you might want to think about purchasing the land outright. Lenders might also need to see a project program and costs submitted by a professional like a project management organization or perhaps an builder.
Before you approach anyone for finance be sure to make a business case on the proposed development to prevent any queries later within the application. I'd advise showing the following;
Copy of planning application and any agreement letter
Details of any Section 106's or any planning retrictions
Details of existing and propsed plans
Cost schedule (including purchase price, fees, renovation/construction costs)
An amount for contingency (Between 10% - 15% of total build expenses is typical)
Estimated end development worth (provide evidence of similar properties)
There are a variety of sources for Property Developers including BuildStore who provide a selection of self build mortgages for developers. There are also numerous building societies that provide self build mortgages for developers. Try Norwich & Peterborough, the Progessive Building Society & Darlington. You may need to undergo an advisor to obtain direct comparisons between products. Remember to take into account the cost of fees and arrangement when you look at initial and variable rates. Its the total cost of the loan you need to compare not only the rate, which could be with an initial time period only. Again, talk to your advisor if you aren't absolutely clear on anything.
Remodelling & Alteration Finance
Renovation & Conversion Finance can be a little easier to find especially if you're looking to stay in the home as the work is being carried out. If you aren't then you may be forced to buy additional insurances to protect the property whlist the project is under completion.
The same as self build mortgages Remodelling and transformation mortgages often come with 'strings attached'. Conventional lenders would rather see a home that could be resided in from the start. This way there funds are risk-free. Bear in mind Banks don't take risks, you do!. Definitely the best way to raise this type of funding would be to raise it by using an existing property or home. Even so, if your Property Development is totally new this will likely not be feasible. In that case there are a number of Renovation and conversion Mortgages available on the market.
Like Self Build mortgages debts are paid gradually on works completed. Here's an example:
Stage 1: Purchase of property
Stage 2: Early costs and structural work
Stage 3: Water tight
Stage 4: Plastering and services
Stage 5: Second fix
Stage 6: Finalization
Each stage is assessed through the lender and that's why most renovation and conversion mortgages attract this type of high admin fee. Again, try BuildStore that happen to be specialists in renovation mortgages for developers.
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