What is development exit finance?
Development exit finance is a short-term loan that repays your development facility at or near practical completion. With the construction risk gone, it’s usually priced lower than the build loan, and it gives you months rather than weeks to sell or let the units. It can also release some of your profit early to start the next scheme.
When it makes sense
- The development loan term is ending, or default or extension charges are about to start.
- Sales are slower than planned and you don’t want to cut prices to clear units.
- You want to keep some units to let and sell the rest.
- You want to release equity for the next site before every unit has sold.
What lenders look for
- Practical completion, or close to it, with building control completion certificates for finished units.
- A structural warranty on new-build units from an accepted provider, which buyers’ mortgage lenders will also need.
- A valuation of each unit, and the total gross development value.
- A sales or letting plan: agent marketing, reservations, and realistic prices and timescales.
Loans typically run for 6 to 24 months and lenders commonly advance up to around 70–75% of the completed value, depending on the scheme and location. Every case is subject to the lender’s underwriting and valuation.
Exits from the exit loan
- Unit sales: each sale repays part of the loan.
- Refinance retained units onto buy-to-let mortgages, or a whole block of flats mortgage if you’re keeping the building.
- A mix of both: sell some, keep some, and refinance what you keep.
Costs
Interest is charged monthly and is usually rolled up or retained, so you aren’t paying monthly from sales that haven’t happened. Expect an arrangement fee, valuation fees for the units and legal costs. Compare the total against what the development loan would cost to extend; the bridging loan calculator helps with the true monthly cost. See bridging loans for how short-term lending works more generally.
Development exit loans are secured on property. Property may be repossessed if you do not repay the loan.
Frequently asked questions
What is development exit finance?
A short-term loan that repays a development loan at or near practical completion, usually at a lower rate, giving the developer time to sell or let the finished units.
When should I use development exit finance?
When the build loan term is ending or getting expensive, sales are slower than planned, or you want to release equity or keep some units to let.
How much can I borrow on development exit finance?
Lenders commonly advance up to around 70–75% of the completed value, depending on the scheme, location and sales evidence.
Do I need a new-build warranty for development exit finance?
Usually, yes. Lenders and buyers’ mortgage lenders normally need a structural warranty from an accepted provider on new-build units.