A Property Development Loan is a specialist short term secured loan, often provided on a stage payment basis. In a market of falling or static property prices, making a profit out of developing property is much more risky.

Lenders today will only make loans if:

• you are a developer with an excellent track record.
• you have an agreed buyer for a development, who has bought off-plan,
• speculative building is contemplated there is a strong rental market for the completed development, ( anticipated rental income must service the debt the developer is carrying).
• you already own the land with planning permission or have substantial collateral

If a loan is approved, the lender will appoint a professional, either an architect or a surveyor as the job requires to sign off the work done at each stage, prior to drawing against the loan. Lenders usually like to maintain a situation where they have advanced no more than 60-70% of the value of the project at any time as value is added. Once a development is completed the Property Development Loan will either be extinguished by the funds from the sale of the development or by a term mortgage based on the final valuation of the property.

The fees charged for Property Development loans are higher than would be charged for a mortgage, because there is ongoing management time required on the lenders part to monitor the status of the development.