Funding sized against the end value of the finished scheme and the cost of building it, released in drawdowns against a monitoring surveyor’s valuation of the work in place.
6 to 24 months · up to around 60% to 70% LTGDV · up to around 90% to 100% of build costs · senior and mezzanine
Typical situations
Planning is granted, the appraisal works and the equity is sitting in the land. A senior facility covers part of the land value and most of the build, drawn monthly against the surveyor’s valuation of what has actually been built. What sets the size of it is the gross development value and whether the build costs stand up to scrutiny line by line.
An office floor becoming flats, or a pub becoming four units. Lenders read the exit as closely as the build: sold on completion, or held and refinanced onto a term facility.
Where the senior facility leaves a gap, a second tranche behind it raises the total advance. It costs more and the senior lender has to agree to it, so it is structured with the senior from the outset rather than added later.
Two numbers size the facility. Loan to gross development value caps the total advance against what the finished scheme is worth, typically at around 60% to 70%. Build cost cover sets how much of the construction the lender will fund, commonly up to around 90% to 100%. Whichever binds first is the one that matters, and on a scheme with a strong end value it is usually the build cost side.
Money is released in drawdowns, normally monthly in arrears, once a monitoring surveyor has valued the work in place. You fund each stage and are reimbursed, so cash flow through the programme is a live constraint rather than a detail. Interest is usually rolled up and settled at the end, which makes it part of total cost and therefore part of the appraisal from day one.
Development schemes are structured to the scheme rather than to a headline range. The £2 million ceiling that applies elsewhere on this site is not the limit here: where the appraisal supports it, the facility is built as a senior tranche and, where the equity has to stretch, mezzanine behind it.
Indicative market ranges, not an offer of finance. Terms depend on the lender, the security and your circumstances.
What the lender assesses
What goes in the pack
Where the cost plan, the contract and the programme disagree, the monitoring surveyor’s first report turns into a negotiation. They are reconciled before submission so the report confirms the case instead of reopening it.
The monitoring surveyor is the person who releases your money. Agreeing the drawdown schedule and the valuation basis at the outset keeps each release a routine rather than a monthly argument.
Retentions, collateral warranties and step-in rights are all things a lender will insist on, and all far easier to agree with a contractor before the building contract is signed than after.
Sales comparables and an agent’s appraisal carry weight that an optimistic end value does not. Both go in at submission, because the gross development value sets the facility.
Most senior lenders expect the land equity plus a share of the costs, which usually lands around 20% to 30% of total cost. Mezzanine can reduce that at a higher price. The honest starting point is the appraisal: where profit on cost is thin, more equity is the only thing that makes the scheme fundable.
The land element releases at completion. Build funding comes in drawdowns, usually monthly in arrears, after a monitoring surveyor has valued the work in place. You fund each stage first and are reimbursed, so the working capital you need through the programme is a separate question from the size of the facility.
Usually it is rolled up and settled at the end from the sale or the refinance, because a site produces no income while it is being built. Rolled-up interest counts towards total cost, so it reduces what is available for the build and belongs in the appraisal from the start.
Tell the lender early. Extensions are normally possible where the scheme is progressing and the exit is intact, and the terms are better arranged before the facility expires. A contingency of around 5% to 10% of build cost is standard, and its absence is one of the first things an underwriter notices.
Yes. Development finance is structured to the scheme rather than to a headline range. Where the appraisal supports it, the facility is built as senior debt and, where the equity has to stretch, mezzanine behind it, arranged together so the senior lender is agreeing to the whole structure.
For the site purchase itself, while planning is secured or the development facility is being put together.
The term facility a completed scheme refinances onto where the plan is to hold rather than sell.
Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
We will come back with the advance the scheme supports, where the gap sits, and whether it is a senior-only case or a senior and mezzanine structure.
