What is property development finance?
Development finance is funding for property development, which could include residential or commercial developments like constructing townhouses or industrial parks.
- Like a traditional mortgage, development loans are secured over property or land
- Unlike a traditional mortgage, the developer doesn’t need to make monthly repayments
- The funding is only expected to last as long as the development project, which could be six months to a few years
- The lender may issue the funds as needed, rather than in a single lump sum
- Once the development is complete, the developer is expected to settle the loan in full
If the developer can’t settle the property development loan once the project is completed, the developer may need to take out other types of finance to settle the balance of the development loan.
For example, if a developer builds an apartment with six units but only sells two, the developer could use bridging finance to tide themselves over until the remaining four units can be sold, or even get a home loan to buy the units.