Whether you are looking to build your dream home, or build an entire suburb, chances are you’ll need some financial assistance. Property development, by its nature, requires significant financial investment up-front, and can take months or years before the rewards are realised. Having access to finance ensures the project can progress from start to finish, despite any bumps along the way.
Finance for property development has its own set of rules and language. The following FAQs will set the scene and help you ask the right questions when looking for finance for your next project.
What is property development finance?
Property development finance is a short to medium term loan for residential, commercial or mixed use development projects. It can be used to buy land, or if your land is mortgage free, the development finance can cover the construction costs. It can also cover both.
When is it helpful to use a non bank lender for property development?
A non bank lender is a good option when traditional banks won’t provide funding. Traditional banks can be limited in approving finance due to policies around lending and an inability to be flexible. A non bank lender is often able to look at the individual circumstances of the developer and provide finance based on their assessment of the project.
A non bank loan is also preferable when time constraints are at play. Timing can be crucial when it comes to making decisions in property development. Non bank lenders are often the choice of experienced property developers for this reason.
Vincent Capital approves loans within 1-2 working days.
What special features do you find with the drawdown of a property development loan?
The initial drawdown of the funding will often be used to assist with the purchase of the development site or to refinance the current mortgage on the land.
After the initial drawdown, the following drawdowns are to pay for the costs of the building works associated with the project. The funding is drawn down monthly or in an agreed period, say bimonthly or quarterly, to pay for the works completed in that period. The advantage of the progressive drawdown is that interest is only charged when the drawdown occurs.
Do I pay penalty interest if I repay the loan prior to the expiry date?
At Vincent Capital, our clients can partially or fully repay a facility at any time during the term of the loan without penalty on 30 days written notice.
What size development loans does Vincent Capital provide?
Development loans can start from $300,000 and go into the tens of millions.
Can Vincent Capital provide bridging for GST on land acquisition and construction drawdowns?
Yes. Depending on the individual characteristics of a loan facility, Vincent Capital can bridge the payment of GST paid on the purchase of a property or pending refund of an Imputation Credit. Vincent Capital can also assist with the timing differences between payment and receipt of the GST on construction drawdowns.
What is equity release?
Equity release is often used between projects where you are waiting to realise the profits from one, but need to go unconditional on the purchase of your next venture. Vincent Capital offers bridging loans to provide equity release.
Can I borrow money to purchase land for development?
Borrowing money for the purchase of land is referred to as vacant land acquisition or land bank financing. Vincent Capital offers loans for the purchase of land. Vincent Capital also provides product transfer from land banking to development loans in circumstances when a client has related consent to develop the land.
What information does a lender require before approving a loan?
This will vary from case to case. Generally, Vincent Capital only requires a brief of your project or the property, equity and mortgage position.
Providing additional details such as a valuation report, resource consent / building consent, construction contracts, sales or purchase contracts, are helpful and allow Vincent Capital to quickly provide an indicative offer.
How quickly can I get an indicative offer?
Vincent Capital recognises the importance of timing and will issue an indicative offer on average within 2 business days.
If you are looking for finance for your next development, and would like to know more about Vincent Capital’s competitive rates and flexible lending criteria, then please get in touch. One of our lending managers would be happy to answer your questions.