Why Shawbrook?
For seasoned developers seeking housing finance or conversion funding, Shawbrook stands as your ideal partner. Since 2016, we have provided over £2.5 billion in funding which includes the development of 8,000 homes. At Shawbrook we offer dedicated relationship directors and local support.
Any property or asset used as security may be at risk if you do not repay any debt secured on it. Our development finance is not regulated by the Financial Conduct Authority or the Prudential Regulation Authority.
What is Residential Development Finance?
Residential Development Finance is ideal for property developers, builders, and investors focused on constructing new homes or renovating existing properties. It provides the necessary short-term capital for property developers to complete residential projects, ensuring they have the means to create or improve living spaces, contributing to the housing market and growth of local communities.
The funds are typically released in stages, aligned with project milestones, ensuring steady progress and repayment usually occurs once the properties are sold or refinanced.
At Shawbrook we recognise that developers need support with a range of projects so provide Development Finance to support with residential developments, but can also support with commercial projects and more.
Types of Residential Development Finance
Asset types for Residential Development Finance at Shawbrook include:
- Apartments
- Houses
- Barn conversions
- Co-living spaces
- Student accommodation – new build or refurbishment
Our finance is designed to support different stages and scales of residential projects, providing customised solutions to meet specific development needs.
Benefits of Residential Development Finance Funding
Residential Development Finance offers flexible funding for property development, allowing you to draw funds as needed and pay interest only on what you use. This type of financing can enhance cash flow and facilitate project completion.
As part of our Development Finance offering, we can support with Development Exits over £1m to help developers navigate unexpected delays, extend the marketing period, or raise funds for a new project.
However, if your needs are for smaller projects or quick property flips, a Shawbrook Bridging Loan might be more suitable due to its shorter terms and faster approval process. Shawbrook provides tailored financial products to meet diverse property investment requirements.
Funding considerations
When securing funding for Residential Development Finance, consider the following key factors
- Project Viability: Conduct a thorough analysis of the project's profitability and feasibility. This should include projected income, potential risks, and a detailed timeline for completion.
- Experience: Demonstrate your expertise in property development. Provide examples of completed projects, including their scale, complexity, and financial outcomes.
- Financial Stability: Show that you have sufficient equity and liquidity to support the project and evidence your personal financial standing to support any guarantees that may be required. This includes having a clear exit strategy and contingency plans for unforeseen circumstances.
- Cost Management: Prepare a detailed budget outlining all expenses, including construction, marketing, and contingency funds. Demonstrating effective cost management is crucial to gain lender confidence.
- Legal Compliance: Ensure that all necessary planning consents are in place. Compliance with building regulations and planning conditions is essential to avoid legal complications that could jeopardize the project.
Costs and fees
When planning for Residential Development Finance, it's crucial to understand the various cost types involved throughout the project - including lender and third party fees. Here is a typical list of key costs to be aware of:
- Loan Arrangement Fees: Charges incurred for setting up the loan, usually a percentage of the loan amount. Charged upon completion of project.
- Professional Fees: Costs for legal advice, architectural plans, and other professional services required for the project.
- Interest: The cost of borrowing money, calculated as a percentage of the loan amount over time.
- Broker Fees: Fees paid to brokers for arranging the loan on your behalf.
- Valuation Fees: Costs associated with having the property independently valued to assess its worth.
- Monitoring Fees: Fees for initial and ongoing oversight of the project to ensure it stays on track and within budget.
- Exit Fees: Charges applied when the loan is repaid.
- Insurance: Costs for insurance such as construction, liability, and property insurance to protect against various risks.
- Contingency Fund: A reserve of funds set aside to cover unexpected costs or overruns during the project.
What is the maximum loan term?
The loan term for Residential Development Finance typically ranges from 12 months to a maximum of 36 months. This short-term financing is designed to cover the construction period, ensuring that funds are available as needed. Once the development is complete, the loan can often be refinanced into a standard mortgage with a longer term. This allows for greater flexibility and better alignment with the project's financial planning.
Can I refinance after the project is complete?
Yes, you may be able to refinance after your Residential Development project is completed. Shawbrook offers refinancing options that allow you to transition to a longer-term mortgage, potentially securing better rates and terms. This could help manage your cash flow and optimise your investment returns. Contact Shawbrook to explore refinancing solutions tailored to your needs.
Typical Finance Structure
Residential Development Finance is typically structured in stages. Initially, funds are provided to purchase the land, followed by phased drawdowns as construction milestones are met. This ensures the developer has access to capital when needed. Interest is usually charged only on the drawn amount, with repayment terms tailored to the project's duration.
How to apply for Funding
Applying for Residential Development Finance at Shawbrook is straightforward. Follow these steps:
- Submit Enquiry: Contact Shawbrook to discuss your project and funding needs. Indicative terms provided at this stage.
- Application Form: Complete and submit the application form with the required details.
- Documentation: Provide supporting documents such as project plans, financial appraisal, and details of previous experience.
- Assessment: Shawbrook will review your application and conduct due diligence. Including site visit.
- Offer: If approved, you'll receive a formal offer outlining terms and conditions.
- Acceptance: Sign and return the offer to accept the financing terms.
- Completion process: Formal valuation and monitoring surveyor reports and legal due diligence undertaken.
- Drawdown: Access funds as your project progresses, paying interest only on the amount used – funds are paid out in arrears against evidenced work on site.
Broker? We’ve got you covered
If you're a new or existing broker, head for our dedicated site where you'll find everything you need on our extensive property offering, and how to submit your cases to us.
Residential Development Finance case studies
Spotlight on deals we’ve done that support property developers like you.
£23.8 million loan fuels first co-living scheme in Wales
Existing customer returned to Shawbrook for expert development finance, aiming to transform a 60,000 square foot office block into Wales' first co-living development.
Supporting developer with fourth project in four years
Shawbrook supports developer with fourth development project in four years, demonstrating emphasis on building strong relationships with their partners.
£6.3m flexible funding package supports new-build housing development near Kidderminster
We supported an experienced developer with £6.3m development finance facility for 7 large, detached houses, providing expert in-life support as plans evolved during the loan term.
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