Development Exit Finance

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In this guide:

What is Development Exit Finance?
How it works
What it's used for
The costs
The interest rates
How much can you borrow?
Can you get development exit finance as a first time developer?
Is it regulated?
How can you get development exit finance?
How quickly can it be arranged?
How can I apply? 

Written by: Sam O'Neill & Sam Hodgson

What is Development Exit Finance?

Development exit finance is a type of bridging loan for property developers mid-way through their development project to save costs and maximise their profit opportunity potentially.

Development finance is sourced to fund an entire project, so it can be more expensive because the lender is at a greater risk at the start.

This is where development exit finance comes in – a cheaper alternative to switch to once you’ve completed the bulk of your project (e.g., your property or properties are wind and watertight), as there is lower risk for your lender, meaning better rates.

How does development exit finance work?

Development exit finance works by repaying your existing development loan with a cheaper exit loan. Your exit finance is calculated on the basis that you’ve already completed the majority of your project, which means there is less risk for your lender, so it is a cheaper rate.

Repaying your existing finance usually means you stop paying interest immediately on your previous loan, as development loans typically charge interest every month.

This means you get savings straight away, added flexibility for your project, and more time to sell, ensuring you realise your development’s full value.

What is development exit finance used for?

There are 3 main reasons to use development exit finance.

To save money while your property sells

If you’ve developed a bespoke property that may take a while to sell (particularly relevant for high value projects), you’ll want to pay the lowest rate possible while it’s on the market. Development exit finance will provide this for you and could also be used to raise additional funds to market the property.

If your property won’t sell in time

If it looks unlikely that your property will be completed and sold before the end of your loan term, you won’t want to drop the price for a rushed sale just to repay your finance.

Development exit finance gives you the flexibility and affordability to finish your project to your desired standards if it is yet to be completed and ensures you realise its full value.

To fund your next development project

If you’re moving straight on to a new development project, you can realise the capital from your completed development and invest the funds into your new project straight away. 

What are the costs of development exit finance?

Development exit finance is structured in the same way as most other bridging loans and development loans, so you’ll probably be familiar with the costs. But here’s a recap:

Your lender’s arrangement or facility fee – typically 2%

Your loan drawdown or admin fee – usually around £295

Redemption fee on your existing loan – usually around £120

• Exit fees – some lenders pay an exit fee of up to 1.25% when your loan is repaid. At Clifton Private Finance, we generally avoid working with these lenders
• Survey or valuation fees – the more complex your project, the most expensive to value
• Legal fees – generally around £850 + VAT
• Broker fee – at Clifton Private Finance, we typically charge a flat fee of £995 or a percentage of the loan amount.

For more information, we have a full guide to bridging loan costs.

The final (and biggest) cost is the interest rate… 

What are the rates for Development Exit Finance?

The exact interest rate you’ll get for your development exit loan will depend on your case. But generally, you’ll often pay a lower rate than you would for ‘ground up’ development finance or the finance you’ve taken out at the beginning of your project.

At Clifton PF, we can source market leading development exit finance interest rates from as low as 0.55%.

Our bridging loan calculator can help give you an indicative quote for your project. 

Development Exit Finance Quotes »

How much can you borrow with development exit finance?

You can generally borrow anywhere between £100,000 and £25m through development exit finance.

There are a few key factors that determine the exact amount, and these factors vary depending on the type of project you’re developing.

• You can typically borrow up to a 75%  LTV (Loan to Value), but you can borrow more for certain refurbishment projects. The LTV you can borrow up to depends on how easily you’ll likely be able to recoup the full value of your loan when you sell and exit.

For some refurbishment projects, we can source funding for up to 90% gross LTV. 

Can you get development exit finance as a first time developer?

Yes, you can.

Generally, your options are more limited as a first time developer or inexperienced developer.

However, we work with lenders who are comfortable with accepting development exit loan applications from those with less experience as long as they understand the terms well and have a clear and robust development timeline for their project. 

Is development exit finance regulated?

Development exit finance and other types of bridging loans are regulated by the FCA if you or a family member intends to live in the property after work is completed.

If you’re developing a property for commercial use or you’re looking to flip the property once developed, you’ll need an unregulated loan. 

How can you get development exit finance?

There are two main ways to get development exit finance – using a broker or going directly to lenders.

If you go directly to a lender, either your current lender or a new one, you’ll need to provide them with your development plans and project information before you get an exact quote. So, this isn’t always the most practical option for comparing development finance lenders and rates, especially if you’re got a construction project to run.

If you use a specialist broker, like Clifton Private Finance, we have existing relationships with multiple lenders and can quickly scour the market for the best rates and overall costs for your situation.

Our clients often find the savings they make on better interest rates significantly outweigh our broker fee.

How quickly can development exit finance be arranged?

Depending on the complexity of your case, we can arrange development finance in as little as one week. For more complex cases, you could expect it to take closer to a month or possibly more. 

How can I apply?

To discuss your project and find out what type of development exit finance solution is right for you, you can speak to an adviser today through a no-obligation, free consultation.

If we find a development loan that you’re happy with (and we’re confident that we will), we can guide you through the application process and liaise with your lender to streamline your application process.

Development Exit Finance Quotes »

Or call us on 0117 959 5094 to discuss your requirements.

Further Reading:

Property development project behind schedule? How to refinance to avoid penalty rates »

How to get development exit finance as your building project nears completion »