| Max LTGDV | 65% |
|---|---|
| Max GDC funded | 85–90% |
| Rate from | 0.90% pm |
| Land day 1 | Yes |
How Ground-Up Development Finance Works
A ground-up development loan is structured in two parts: the land element (drawn on day 1 to complete your land purchase) and the build element (released in tranches as construction milestones are certified by a monitoring surveyor). This means you are only paying interest on funds as you draw them, not on the full facility from day one.
- 1
Day 1 - Land Drawdown
Funds to purchase the land drawn on completion. Typically 60–65% of open market land value. Day 1 land purchase is included in the facility.
- 2
Months 1–3 - Pre-Construction
Pre-build Architect, structural engineer, planning conditions discharged, contractor procurement. Professional fees can be included in the facility.
- 3
Months 3–18 - Construction Tranches
Build costs released monthly or at agreed milestones following monitoring surveyor inspection. Each tranche certified against the approved schedule of works.
- 4
Practical Completion - Exit
Loan repaid from unit sales, development exit finance, or long-term commercial/residential mortgage. Final retention released on sign-off.
Key Lending Metrics Explained
LTGDV - Loan-to-Gross-Development-Value
LTGDV is the ratio of your total loan (land plus build) to the projected end value of the completed scheme. Most lenders cap this at 60–65%. At 65% LTGDV on a scheme with a £2m GDV, the maximum total facility is £1.3m. If your total costs exceed this, you fund the difference from equity.
GDC - Gross Development Cost
GDC is the total cost of the scheme: land purchase price, build cost, professional fees, finance costs and contingency. Most lenders will fund up to 85–90% of GDC, meaning the developer's equity requirement is 10–15% of total costs. This equity must be injected before or alongside the lender's funds.
Development Finance Rate Table
| Scheme Type | Rate (per month) | Max LTGDV | Max GDC | Typical Term |
|---|---|---|---|---|
| Residential (1–4 units) | 0.90–1.1% | 65% | 90% | 12–24 months |
| Residential (5–20 units) | 0.95–1.2% | 65% | 85% | 18–36 months |
| Residential (20+ units) | 1.0–1.3% | 65% | 85% | 24–48 months |
| Mixed-use | 1.0–1.25% | 60% | 85% | 18–36 months |
| First-time developer | 1.1–1.4% | 60% | 80% | 12–24 months |
What Lenders Look For
Development lenders conduct thorough due diligence. The main areas assessed are:
- Developer track record - completed projects of similar scale and type. First-time developers can access finance but at higher rates and lower leverage.
- Planning permission - full planning permission is required by most lenders. Reserved matters and conditions must be dischargeable within a reasonable timeframe.
- Build cost - a detailed schedule of works and fixed-price building contract (JCT or NEC) are typically required. Lenders want comfort that the cost plan is robust.
- Contractor quality - lenders assess the contractor's experience, financial standing and insurance position.
- GDV evidence - independent RICS valuation required, assessing projected GDV on an "as complete" basis.
- Exit strategy - sale, development exit loan or long-term mortgage - must be credible and supported by market evidence.