Development Exit Finance

If you are at the end of your development project but need some more time because you are close to the end of your term, development exit could be ideal.

What Is Development Exit Finance?

Developer Exit Finance is used to pay off and refinance your current development loan.

It can also be used to complete part built developments to save you money, in the long run, on interest.

How To Use Development Exit Finance

Development exit loans can be used in several ways.

You’re coming to the end of your current development loan term

Having put significant effort and money into your project, you won’t want to have to go over loan term or sell quickly to clear the current development loan.

Going past the agreed loan term will probably have significant financial implications which will take away from the profit you should make from the development. Selling quickly, under time pressure, can often mean dropping your price, which will again reduce your profit.

Development exit finance can buy you time to sell or refinance in a more convenient timescale.

The loans come with no exit fee so can be paid back whenever you want, they are also normally charged by daily interest so there’s no need to pay more than you need.

You want to save on your current rate

By moving to a development exit loan you can potentially save money on interest, rather than staying with your current lender.

With rates (as of October 2020) starting at around 0.5% per month, there are considerable potential savings to be made.

Capital raise quickly

As well as potentially saving you money on interest you could get access to the increased equity in your project while you wait for it to sell.

The funds you raise can be used to move on to the next project so you can have continuity in projects.

Complete a project

Development exit can be used to complete part built projects. Lenders will normally require the property is wind and watertight before they will start to lend.

You could find you save significantly on interest costs by refinancing part way through your project.

Achieve higher sale prices

A standard development facility may not give enough time to achieve optimal sales, once the build has been completed, particularly if you’ve experienced delays during the build period. 

By taking a development exit facility you are able to extend the time available to achieve a sale. This can relieve time pressure and give you breathing space to get the price you want for your completed project.

Development Exit Finance Criteria

  • Borrow from £100,000
  • Rates from 0.44%
  • UK wide availability
  • 3 year terms available
  • Adverse credit acceptable
  • First time developers accepted
  • 75-80% Loan to value

How Much Can I Borrow On A Development Exit Loan?

Much of this will depend on the value of the property(s) you are using as security for the loan. The higher the value, the more will be available. Loan to values may be restricted if there are any commercial aspects to the property.

It is worth bearing in mind that as the loan to value increases, so does the risk and therefore it will probably attract a higher interest rate.

How Much Will A Development Exit Loan Cost?

Development Exit loans are essentially bridging loans, which is a very competitive area of finance, so rates start at 0.44% per month, for those that fit the criteria.

Lenders will charge an arrangement fee, the precise amount varies between lenders though it is typically 1-2% of the loan amount.

Unlike most development finance, with bridging and development exit finance, you probably won’t have to pay an exit or early repayment penalty. This gives you the flexibility to clear the loan as soon as you can, without incurring additional costs.

How Quickly Can I Get A Development Exit Facility?

Lenders will aim to complete these as soon as possible for you which can be as fast as 7 days. 

To ensure as quick a conclusion as possible, it’s important your solicitor deals with the lender enquiries in good time.

The nature of bridging is to provide flexibility and provide quick completions, so lenders are set up to move enquiries along without delay.

Do I Need To Make Monthly Payments?

While you can make payments if you want, which would save on interest, the vast majority of borrowers and development exit loans don’t need them. 

The interest is either deducted from the amount you borrow at the outset, to cover the term of the loan, or it is “rolled up”. This means the interest is added to the balance each month and the lump sum is repaid on sale of the loan or refinance.

Do I Need To Pay Off The Loan In One Lump Sum?

As you sell off your development you can use 100% of the proceeds of each sale to paydown the debt, if you wish.

Lenders do understand the need for cashflow, so you can arrange to make partial repayments, if that is more suitable for your business.

What Information Will The Exit Finance Lender Need?

The application process is generally very straightforward, generally you will need to provide:

  • Property address
  • Sales particulars
  • Warranties
  • Current borrowings
  • Your company information

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