Standard mortgages don’t fund build costs. Development finance fills that gap, funding land and construction with staged drawdowns tied to build progress and monitoring surveyor sign-offs.
Typical structure
• Initial advance to acquire land/assets.
• Further funds released in stages as works are completed.
• Interest may roll up to preserve cash flow during the build.
• Term generally 6–24 months, aligned to project timeline.
• Exit via sales or refinance to a term product (e.g., BTL or commercial mortgage).
Worked example
Land £400,000; build £600,000; GDV £1.4m. Lender advances 70% of land (£280k) and 100% of build in stages (£600k). Developer contributes £120k. On sale, proceeds clear capital plus interest/fees; residual is profit (subject to costs and market conditions).
Benefits
Access to substantial funding, staged drawdowns improve cash efficiency, ability to fund heavy refurbs and ground-up schemes, and terms tailored to the scheme’s risk profile.
Key risks & costs
• Pricing higher than term debt; fees include arrangement, monitoring, valuation, legal.
• Build risk: delays, cost overruns, contractor risk.
• Market risk: sales values and absorption speed can change.
• Exit risk: refinance depends on lender appetite and rental coverage at completion.
Who uses it?
Experienced developers, first-time developers with strong teams, landlords scaling portfolios through conversions, and construction firms seeking leverage.
Alternatives
Bridging loans for simpler/shorter projects, mezzanine finance or equity for larger schemes, or JV partners to share risk and capital.
Why Everest Mortgages?
We match schemes to lenders that fit the asset type and developer profile, help structure leverage and cash-flow, coordinate drawdowns and QS requirements, and line up exits early to protect margins.
Final thoughts
Development finance enables ambitious projects—but demands tight planning and risk management. The right structure and lender partner make all the difference.
Planning a build or conversion? Contact Everest Mortgages at Everest-Mortgages.co.uk to structure competitive development funding.
