It would cost 1,800,000. The expected sale price is 4,600,000. The client is an experienced developer and has a high net worth. The client plans to sell the completed houses on the open marketplace.
Both the client and the lender need to borrow the funds to purchase the site. If possible, the lender would also like to finance all build costs. If the total amount of the loan is less than 90%, we can lend 70% of site purchase and 100% of build costs to our selected lender.
Final step is to make sure the funds borrowed meet the lender's loan-to-gross development value (GDV). The client can borrow up 75% of the gross developmental value in this example. This would allow us to proceed with the application as the loan would meet the lender's requirements.
Usually, funds are released in stages. The initial release is used to buy the site or refinance existing debts.
To get the highest return on your investment, leverage business transactions has been used for a long time. Property development financing can help you make your money work harder.
The client can borrow 2,500,000.00 by lending 70% of the purchase cost and 100% of the construction costs. This is less than 90% of total project costs. The purchase price of 700,000.00 would be paid upfront. Rest of the funds would be released over the course the loan term.
What is development finance? Development loans are characterized by monthly interest being rolled up and added to the loan. After the term ends, the loan and any interest are repaid in full. This happens when you re-mortgage or sell the property.
