Ground-up development finance for UK new builds
I need ground up development finance that funds my new-build property scheme from land purchase through staged construction. I provide capital for the site, professional fees and build costs, while the lender normally releases construction money in monitored drawdowns rather than one advance.
Ground up development funding for a new build
Vortex Finance is a whole-of-market property finance broker, not a lender. We assess business and investment schemes, compare a qualitative whole-of-market panel and package the selected application.
Typical facilities start around £250,000 and can exceed £25m on larger projects. Mainstream residential schemes are indicatively priced from 6.5% to 9.5% per annum. The provider confirms the loan, rate, gearing, conditions and approval after underwriting.
The free quote is a broker assessment, not an approval. It shows the likely land advance, development finance facility and evidence required before valuation or legal work.
Property development finance for residential and mixed-use schemes
Property development finance can support houses, flats, build-to-rent, multi-unit residential properties, mixed-use buildings and selected business-use schemes. The common feature is a new development that creates a new property from scratch. A light refurbishment with no structural work usually needs a different product.
The underwriter tests the property types, property market, unit mix and proposed sales or longer-term funding route. A residential development with several standard units may attract broader provider appetite than a specialist commercial property finance case. The right structure follows the property development project, not a generic maximum.
Bridging finance through a bridging loan can cover a time-sensitive site purchase before the main build facility is ready. The exit from that bridge must be credible, with planning permission, equity and the development loan progressing rather than assumed.
Planning permission and site readiness
Detailed consent normally gives the underwriter a clearer basis for value, programme and build scope. Planning conditions, Section 106 obligations, Community Infrastructure Levy and pre-commencement requirements should appear in the programme and cash flow where they apply. Do not treat a consented site as ready to draw until those dependencies are understood.
The site file should include title information, planning documents, drawings, surveys, utilities position and access. The valuer will consider the current property value and the value of the property when finished. The monitoring surveyor will review technical risk, build schedule, cost plan and professional appointments.
If a purchase must complete before full planning or before the facility is documented, a short-term bridge may cover the earlier stage. That route adds borrowing cost and replacement-funding risk, so the timetable must allow for both transactions.
Build cost, contingency and staged drawdowns
Construction capital is commonly released in tranches after the monitoring surveyor confirms progress. The first advance can contribute to the land or repay existing site debt. Later advances fund certified construction work. Some lenders release against work already completed, so I need enough cash to carry the gap between invoices and reimbursement.
A detailed build budget should separate main works, professional fees, utilities, statutory charges, contingency, sales and borrowing costs. The funding provider will compare the budget with the specification and programme. A thin contingency can reduce confidence because cost overruns still need to be paid.
Ask how the provider calculates interest. A charge on drawn funds differs from a charge on the full commitment. Retained interest can reduce monthly cash pressure, but it uses part of the loan. The cash flow should show each drawdown date, expected balance and equity already invested.
Development facility gearing: LTC and LTGDV
A lender normally applies several limits at once. The day-one advance may reach an indicative 60% to 70% of site value. Loan to Cost (LTC) compares debt with eligible total development expenditure. Loan to Gross Development Value (LTGDV) compares the facility with the expected value of the completed scheme.
Standard senior debt can indicatively reach up to 80% LTC and 70% to 75% LTGDV. The lowest limit usually sets the loan amount. A strong finished value does not remove the need for cash equity if the day-one or LTC test produces a lower result.
Stretched senior or mezzanine debt can increase gearing, sometimes above 80% LTGDV. The extra capital carries a higher price and can add conditions. It should solve a defined equity gap while leaving a viable profit and exit.
Development finance lender underwriting and documents
The underwriter reviews the borrower, site, professional team, programme, budget and repayment route together. Underwriting commonly covers:
- company structure, identity, credit history and source of equity;
- site purchase contract, title and existing charges;
- planning permission, drawings and conditions;
- development appraisal, cost plan, cash flow and contingency;
- main contractor, quantity surveyor, architect and other appointments;
- comparable development experience from the developer and team;
- sales evidence, refinance assumptions and exit timetable.
Documents should tell one consistent story. If the planning schedule, build programme and cash flow use different dates, the underwriter has to stop and reconcile them. Clean packaging does not guarantee approval, but it makes the risks and funding requirement easier to assess.
Experienced developer and first-time developer criteria
An experienced developer should show completed property projects similar in size, use and construction risk. Lenders look at delivery against budget, previous loan repayment and how the team handled delays or cost changes. A record on small refurbishments does not automatically support a large new-build scheme.
A first-time property developer can still obtain specialist build funding. The lender may ask for more equity, lower gearing and a stronger professional team. Relevant property industry experience as a builder, project manager, architect or investor can help when it connects directly to the proposed work.
The practical question is whether the borrower and appointed team can control this build, report progress and fund a shortfall if one occurs.
Development finance options across senior, stretched and mezzanine debt
Build loans can use senior debt as the base development finance solution. Stretched senior extends gearing within one facility. Mezzanine finance sits behind the senior lender and fills an equity gap at a higher price. Equity or joint-venture capital changes ownership economics rather than adding another development finance loan.
Compare routes on total pounds payable, equity required, drawdown conditions, covenants and control rights. A cheaper rate is not useful if the facility leaves a land shortfall or releases construction money after it is needed.
“I need all of the build funded.”
Some facilities can cover the full eligible construction budget, but the scheme still needs borrower equity against land, fees or risk. Additional security, stretched senior or mezzanine may close the gap. That is not the same as an unsupported 100% senior loan.
“The highest LTGDV must be the best offer.”
Higher gearing can preserve cash for another scheme. It can also raise pricing and reduce headroom if sales values or costs move. Model the effect on profit and contingency.
Development finance team process from site to first drawdown
- Assess the scheme. I share the site, planning, appraisal, funding need, team, experience and exit. Vortex identifies missing evidence and the likely lender fit.
- Compare viable routes. Our broker team reviews senior, stretched, mezzanine and bridge-to-development options across a whole-of-market panel. We compare rate, gearing, fees and drawdown mechanics.
- Package the application. Once I choose a route, Vortex organises documents for valuation and underwriting. The provider sets conditions and instructs its advisers.
- Manage valuation and legal work. We keep the borrower, provider, valuer, monitoring surveyor and solicitors aligned.
- Reach first drawdown. Funds release when credit, legal and technical conditions are met. Later tranches follow the agreed monitoring process.
The timetable depends on the lender, valuation, monitoring surveyor, planning position, title, legal work and how quickly the required documents are supplied. Tell us the required first-drawdown date at the start; the lender confirms timing.
Exit strategy for a completed development
The exit strategy repays the loan and interest. Unit sales are common, but the lender will test sales values, absorption rate and the time required to complete each sale. A refinance exit needs evidence that the completed asset can meet the intended mortgage criteria and valuation.
Development exit finance can repay existing development finance once practical completion is near, giving more time for sales or a long-term mortgage. It is a separate short-term loan with its own valuation, pricing and conditions. I include this finance cost and option in the timetable before the original term expires.
A delayed exit can create extension charges or pressure to sell. Sensitivity testing should show what happens if values fall, sales take longer or mortgage proceeds are lower than expected.
Development loan cost example for a new build
Consider an explicitly illustrative UK development with a £600,000 site, £900,000 of build and eligible project expenditure, and a £2.2m GDV. Total eligible expenditure is £1.5m. At 70% LTC, the cost limit is £1.05m. At 65% LTGDV, the value limit is £1.43m. The £1.05m LTC result therefore caps this example.
Assume an 8% annual rate and an average drawn balance of £650,000 for 18 months. Illustrative interest is £78,000. A 1.5% arrangement fee on the £1.05m facility is £15,750 and a 0.5% exit fee is £5,250. Add an indicative £2,000 valuation and £3,000 standard legal charge, and the subtotal is £104,000. Monitoring, scheme-specific professional fees and any broker fee are excluded because they vary.
A development finance calculator can test alternative drawdown dates, rates and sales timing. It cannot confirm lender appetite or replace a credit-backed offer.
Residential development finance questions
What is a new-build development?+
Can funding cover 100% of build costs?+
Can I apply without full planning?+
How are staged drawdowns released?+
Could this funding be regulated?+
Match property development funding to my scheme
I need a facility that buys or repays site debt, releases capital in step with the build and leaves enough headroom for a credible exit. I share the planning position, cost plan, completed value, equity, team, experience and repayment route. Vortex acts as my broker. The lender confirms the final loan, rate, fees, conditions and approval.
Request my free development finance quote