There can be a lot of confusion surrounding Development Finance and what it implicates within the financial world. A question that is frequently asked is: What is the difference between Development Finance and Commercial Mortgages? And this is where the confusion often stems. Development finance is where an individual or company/business is looking to develop property/properties and have some capital but need a short term loan to help complete the development. Depending upon the lender and the circumstance, such loans normally span between 12-24 months. Commercial Mortgages on the other hand, are usually only required once the development has been completed and additional funds are necessary. Hence, Development Finance and Commercial Mortgages do tend to overlap. Despite the "Credit Crunch", Development Finance is rapidly becoming more main-stream and is a very specific type of finance. High street lenders are very active within this market as development finance is popular with people, small and large businesses alike. It is recommended that you seek professional advice in order to find the right deal for you.
Development Finance is most popularly used in the UK for such projects as Property Refurbishment, Property Conversions and New Build Projects.? Additionally, there are various types of Development Finance which undoubtedly adds to the confusion and uncertainty surrounding the term.?? For example, a Senior Debt Loan is the most popular as it covers the first 70%-80% of loan to value and a Mezzanine Loan is second to the above form and helps the developer if his money is tied up elsewhere in different things. It is to be noted that this is by far a definitive list.
?Property development is about having a vision; it's about understanding the market and turning that vision into a reality. However, developers often have problems getting the finance right and knowing what products are available and which lenders to use can be confusing. Finding the right form of Development Finance for you depends entirely upon your financial needs, whether you are a homeowner wishing to refurbish, a business looking to expand or an individual with a vision to start anew. Community projects also use this form of finance in supporting people and businesses in disadvantaged communities, both in the UK and worldwide. Therefore, Development Finance is determined entirely upon an individual assessment made by the lender. All aspects of the development proposal have to be faultless in the eyes of the lender before they agree to provide funding. Lenders look meticulously at development characteristics such as land purchase, ground work, labour and services, first and second fix and then sign off. In the difficult current market, lenders have to be more careful when choosing which developers to back; they are much more likely to support a developer with experience in the field than someone new to the industry.
?Development Finance lenders are there to build a relationship with the developer in order to share their vision and provide the support needed to make that vision a reality. The loan can cover costs such as building costs, labour and can often include any architect costs and other professional fee's such as wages and drawings. Property development loans will be secured against the land or the property you wish to develop. Newer forms of Development Finance funds are available either for debt, mezzanines or equity in combination with primary lending sources. More traditional forms, like with Commercial Mortgages, normally require a deposit of at least 20-30%.
?Loan to Value rates and interest rates vary depending upon experience and percentage of funds required for development. Advantages of this form of financial assistance include it can be raised quickly, turning your dream into reality sooner rather than later and that each proposal is considered on its individual merit. Another advantage of this form of finance is that the lender will always be there to help manage the development programme and lend support. So, whether you intend to use your finished project as an investment or whether it's used to help your business grow, Development finance is a fully supportive and flexible form of financial assistance to help you make that vision a reality. As with any financial decision research the market thoughrouly before proceeding, look for the best commercial mortgage rates available and be aware that there may be other commercial property finance options available.
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Tags: Commercial, Finance, form, individual, Land, Property, support, vision
Source: http://loan-modification-help.biz/2011/09/development-finance-vs-commercial-mortgages/
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