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Property Development Exit Loans: What They Are, How They Work

Property Development Exit Loans: What They Are, How They Work 49

Many developers sell their properties upon completion, raising the funds needed to repay their development finance facility outright. But what if you decide you prefer to retain ownership of the development, in order to let it out for long-term gains?

Likewise, what happens if you are unable to find a viable borrower for your property by the deadline agreed with your lender, or would like to hold out to get a better price for it?

In both instances, the answer could lie in a property development exit loan.

What is a Property Development Exit Loan?

Property Development Exit Loans: What They Are, How They Work 50A property development exit loan is a specialist short-term facility, used to repay an initial development finance product in full. It is essentially a large bridging loan, which provides the developer with additional room for manoeuvre when their original loan term comes to an end.

For developers who decide to retain their properties for any reason, a development exit loan can provide ample time to secure a longer-term refinance product, like a buy-to-let mortgage. Elsewhere, it can provide anything from 1 to 24 months’ breathing room, while a suitable buyer for the development is found or a decision made about what to do with it. 

What Are the Benefits of Property Development Exit Loans?

Just a few of the potential benefits of a competitive property development exit loan include the following:

  • The developer is able to repay their original development finance product on time, avoiding potential fees and penalties for late payment 
  • Interest rates and borrowing costs are lower than those of a typical development finance product, as the lending risk is reduced
  • Property development exit loans provide developers with additional time to find suitable buyers for the developments and negotiate higher prices
  • Interest can be rolled up into the final loan repayment, meaning no monthly payments need to be made along the way

In essence, a property development exit loan works like an extension to the original development finance loan.

What Are the Main Features of Property Development Exit Loans?

All property development exit loans are bespoke products, but the following features apply in most instances:

  • High LTV available up to 75% (sometimes higher in special circumstances)
  • Low monthly interest of as little as 0.5% or lower
  • No exit fees or excessive additional borrowing costs
  • Available at short notice for projects approaching completion
  • Can be taken out against almost any type of property
  • Loans sizes available from £100,000 to £50 million
  • Flexible terms of 1 month to 24 months, with early repayment possible

As time is often a factor when arranging a property development exit loan, independent broker support comes highly recommended. Your broker will help prepare and present your application in a way that minimises delays and disruptions, potentially enabling you to access the money you need in a matter of days.

They will also help you build a thorough understanding of the other options that may be available, including a commercial bridging loan or longer-term repayment facility.

Property Development Exit Loans: What They Are, How They Work 51

About the Author

Craig Upton supports UK businesses by increasing sales growth using various marketing solutions online. Creating strategic partnerships and keen focus to detail, Craig equips websites with the right tools to rank in organic search. Craig is also the CEO of iCONQUER, a UK based SEO company and has been working in the digital marketing arena for many years. A trusted SEO consultant and trainer, Craig has worked with British brands such as UK Property Finance, Serimax, djkit and also supported UK doctors, solicitors and property developers, gain more exposure online. Craig has gained a wealth of knowledge using Google and is committed to creating new opportunities and partnerships.

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