Property Development Loan: : Loan to Develop Your Property.
The group of words "Property Development
Loan" is self-explanatory-A loan which is borrowed to
develop properties. There are lenders who offer property
development loans on the basis of profitability of the
property project.
A property development loan is a type
of loan offered by a lender, usually bank, to an entrepreneur
or for that matter any organization, for development
of a property. In this case, like any other category
of loan, the lender lends the money for certain duration
of time at a certain rate of interest, which becomes
the profit for lender. On its part, the borrower agrees
to pay within the decided time period in the mutually
decided number pf installments.
Almost all property development loans are construction linked, which means instead of disbursing full payment at one time, certain percentage of loan amount is given in the beginning and then rest amount is given in phases, a certain percent of the total amount at a time, depending upon the percentage of work done.
One of the most important factors in property development loan is that few lenders ask the borrower to invest his portion of money in project development before they disburse the first installment of loan. Subsequently, lenders pay in the ratio of project completed.
Property development loans
In case of property development loans, loan amount depends
upon the profitability, viability and risks associated
with the property development project. Similarly, rate
of interest charged by lenders depend upon the profitability
and risks associated with the project. If the project
seems risky or viability is not guaranteed, lenders
charge higher interest than a project which is sure
to be profitable. This higher interest rate is charged
by lenders to compensate against the increased risk
associated with the property project. Some of the key
features of property development loans are:
Loan amount (criteria varies from lender to lender; some of the common are give below)
- Loan amount depends upon project profile
- However, usually it is up to 100% of the cost of the project
- amount varies between £30,000 and £30 million
- Up to 70% of the land cost and 70% of the building costs
Repayment period: Up to 12 months
Interest Rates: Variable rates, generally between 2% and 3% above the Bank of England's base rate.
Repayments: On project completion
Therefore, if you want to develop a property, you can borrow loan from lenders who offer property development loans. Money in case of property development loan is disbursed in the ratio of actual construction done and loan is repaid at the end of the project by selling the property or by refinancing the property.
