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The following article was published in our article directory on October 30, 2020.
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Article Category: Business
Author Name: David Farrell
Developing a property purchased at a low price can significantly increase its value, allowing you to make a good profit. Development financing can help make this possible, and understanding how it works is important to implement development project plans.
What Development Finance Offers
Different kinds of development can be financed, depending on the type of development. A small development project may involve mere aesthetic renovations and no structural work. This may be either for the owner to enjoy their property better, or to increase the resale value of the property.
Development financing lenders also consider loan applications for residential redevelopment that requires heavy structural work such as building an extension. This type of project can considerably increase the property value.
There are also borrowers looking to finance long-term investments. A popular option for investors who intend to become landlords is the develop-to-let financing option. This involves taking a loan for property renovation with the intention to rent out, rather than sell.
Development finance can also assist in financing massive development projects. These include new builds and conversion projects. This type of project attracts lots of investors as it promises huge returns. If you are considering applying for a loan of this magnitude, it is recommended that you work with a broker who can potentially help you save a lot of money.
Applying for Development Finance
Development financing works in a different way compared to a traditional mortgage. Typically, the lender assesses the property�s value, then offers a loan based on the predicted property value after the completion of the development project.
When applying for development finance, you must submit a detailed application that includes information on the acquisition cost, development cost, building timescales, and professional fees. You will then be provided with the lender�s terms before a credit check is conducted. Your application may be in jeopardy if you have a poor credit rating. Thus, you need to check your credit score before applying.
The lender will still monitor your credit performance even after your loan approval. Bear in mind that negotiation for loan interest is negotiated during the process of application. Thus, it may be difficult to compute the final cost in the early stages.
Is a Broker Necessary?
Technically, having a broker isn�t necessary when applying for development finance. But, it is a good idea. As each development project is unique, lender underwriting is done individually. Having a broker can help you determine if your prospective lender�s offer is the most beneficial one for you. The broker can also match you with the right lender that can help you achieve your goals
A broker can also help you make a more accurate projection of the total cost of the loan, and find a deal that will be most suitable for your particular situation. A good broker will work with you throughout the entire process of development finance application. They will keep you updated on the status of your application, and will negotiate for you, when necessary.
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Keywords: Development finance, construction finance, bridging loans, 100% development loan
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