Development finance works differently to traditional mortgages. Usually, lenders assess the value of the property and then offer a loan based on that and the borrower’s eligibility.
For Development Loans, lenders assess the predicted value of the property once the development project is completed.
The lender will require a detailed feasibility from the borrower detailing the proposed use of the land to achieve best use and financial outcome.
Often the input and support from your accountant, architect, builder, and real estate professional will be required.
CONSTRUCTION LOAN overview
Construction Loans are structured to be drawn down and paid to the builder based on his progressive completion of the project. At the completion of each stage the lender will inspect the works prior to paying the builder invoice.
If you already own the land, you may be able to use equity as collateral for the loan.
If you’re using the construction loan to also purchase the site and complete the project, the settlement of the land purchase will be the initial drawdown and the construction loan will take place over the build progress.
The lender will require a detailed feasibility detailing the proposed use together with approved plans, permits and a Build Contract from an approved builder.
Teo Torrelli, Director of MKS Lending Group has been arranging Development and Construction Loans since 1985. He will work with Private and Bank lenders and deliver the loan solution.