Development Finance Calculator

Most property developers will tell you that securing a suitable funding package is one of the most critical elements when determining the profitability of any development project. Doing your homework, where the financial aspects are concerned, is vital and can be the difference between failure and success.

Start by entering the relevant details into our development finance calculator. You can then tweak certain variables, such as the loan term, rate of interest, and exit fees, in order to see how the outcome is affected when choosing one product over another. For example, if one product has a lower borrowing rate with higher exit fees and the reverse is true of another development loan, there will obviously be a crossover point where one product will be more affordable than the other, depending on the amount borrowed and the loan duration, among other factors.

Although our online development finance calculator is an excellent reference tool that is designed to provide highly accurate results, it should still only be used as a guide. By talking to one of our trained advisors, you will be able to get a much better deal based on your individual needs and borrowing criteria.

Lenders have different rates depending on the specific type of development, the level of investment that you intend to provide yourself, and the location of a project. Development finance is complicated at the best of times, which makes it imperative that you get as much expert help and advice as possible when applying for a loan.

When using our development loan calculator, you will need to provide the following information before the results are generated:

Loan amount: The total net loan amount is the overall amount you want to borrow. This includes any funding required on the first day and any additional financing that will be required throughout the subsequent stages of development. There is no need to include the borrowing fees or interest charges, as these will be calculated automatically.

Loan term: This is the total length of the loan term, expressed in months.

Land cost/residual value: If you already own the land, then you need to enter the residual value. Alternatively, you will need to enter the land cost in order to determine if it would be more profitable to sell the development site as opposed to building on it yourself.

Stamp duty: This is the amount of stamp duty you are expecting to pay when purchasing a development site.

Amount available from customer: This is the amount of funds you are willing to invest in the development project from your own pocket.

Build cost: The total projected costs for the development, excluding stamp duty, land costs, and facility charges.

Gross development value: The GDV amount is the gross value of a project on the completion date. Or at the expected stage of development, where you intend to sell a project once certain works are finished.

Prime funding (initial release): This is the amount of finance you require at the first stage of the development (i.e., on day one).

Calculate interest by year or month: Most interest charges are worked out on an annual basis, but you can change this to monthly when using the calculator.

Interest rate: Although on our calculator this is set to a predefined percentage by default, you can change the rate of interest to match the product you are applying for or wish to compare.

Releases: You will need to calculate how much funding you require and on which dates. With development finance, you only pay interest on funds that have been released. By altering the amounts and the release times of the various stages of funding, you can easily see how the interest charges will be affected and how profitable the project will be.

Property development finance — borrowing fees

When using our property finance calculator, various costs and borrowing fees will be worked out automatically. However, with so many lenders offering so many products, the fees can vary significantly from one loan to the next.

The facility fee is the main cost of borrowing that a lender will charge for granting you access to a specific product. This is typically worked out as a percentage of the total amount borrowed, or the GDV (gross development value).

Other fees include valuation costs, legal costs, and surveyor fees. To keep things simple, the calculator will provide a quick estimation of these charges.

An important factor to consider when applying for development finance is the exit fee. This is the amount you will be charged when settling the debt in full. Again, this is worked out as a percentage of the total gross loan amount, or the GDV, and it is set to 1% by default.

Other costs and VAT claim back

If there are any other costs involved with a project, then you need to enter them in this section. These are any costs that are not included in the total build costs.

If you are entitled to claim any VAT back, then you can enter this amount in the VAT Claim Back section. VAT refunds will reduce the total cost of a project and, subsequently, increase your profits.

Property development finance calculator — results

Once you have submitted the requested information, the calculator will return a list of results.

These are broken down into the following:

Monthly interest: This displays the gross loan amount on a month-by-month basis, taking into consideration the facility fee with the total amount of funds released plus the actual interest charges at the end of each month.

Net loan amount: The overall loan amount requested, along with the funds released on day one and any subsequent funding you expect to be released.

Facility fee

Interest charges: The total amount of interest you will be charged.

Gross loan amount: The net value of the loan along with the facility fee and associated interest charges.

Exit fee

Redemption loan amount: The amount required to settle the loan (gross loan amount + the exit charges)

Valuation costs: A quick estimation

Quantity surveyor fees: Approximated

Legal costs of borrowing: Approximated

Other costs: Any other costs added to the total build costs, as entered by the applicant.

How is development finance calculated?

Development finance is calculated based on several factors, including the total project cost, the value of the property or land, the developer’s experience, and the lender’s risk assessment. Typically, lenders consider the loan-to-cost (LTC) and loan-to-value (LTV) ratios when determining the amount of development finance to offer. The LTC ratio represents the percentage of the project cost that the lender is willing to finance, while the LTV ratio indicates the percentage of the property’s value that the lender will lend against. Interest rates, repayment terms, and other financial arrangements are also factored into the calculation based on the specific terms of the development finance agreement.

Can you get 100% development finance?

While it’s possible to secure 100% development finance in certain cases, it’s relatively rare and usually requires a strong track record, solid project feasibility, and collateral or guarantees to mitigate the lender’s risk. Lenders offering 100% development finance often scrutinise projects meticulously to ensure their viability and minimise the risk of default. Developers may also explore alternative financing options or partnerships to secure the necessary funding for their projects if they are unable to obtain 100% development finance from traditional lenders.

How much does development finance cost?

The cost of development finance varies depending on factors such as the lender’s terms, interest rates, fees, and the perceived risk associated with the project. Development finance typically includes interest payments, arrangement fees, surveyor fees, legal fees, and other charges associated with obtaining and servicing the loan. Interest rates for development finance can be higher than those for traditional mortgages due to the higher level of risk involved in property development projects. Developers should carefully evaluate the total cost of finance and consider it alongside the potential returns from the development project to determine its feasibility and profitability.

How much can I borrow for property development?

The amount you can borrow for property development depends on factors such as the project’s size, location, feasibility, projected profits, and your financial credibility. Lenders typically assess the viability of the development project, including factors such as the anticipated end value of the completed project, the level of demand for the properties, and the developer’s experience and track record. Loan-to-cost (LTC) and loan-to-value (LTV) ratios are used to determine the maximum amount of funding available, with lenders typically offering a percentage of the project’s total cost or the property’s value, depending on their risk assessment and lending criteria. Developers should present comprehensive project plans and financial projections to lenders to support their borrowing requirements for property development.