Why developers use exit finance
Development loans are priced for construction risk. Once the build is finished, that risk has gone, but you're still paying for it. And if the development loan runs past its term, default interest can wipe out your profit. A developer exit loan replaces it with cheaper finance secured on the completed units.
- Repay development finance before it expires.
- Avoid selling units at a discount to clear the debt.
- Release some of your profit to start the next site.
- Keep units to let, then refinance onto term finance.
Wind and watertight schemes
You don't always have to wait for practical completion. Exit finance is available on schemes that are wind and watertight, with roof, windows and external doors in place. Lenders will want to see the costs to complete and how you'll fund them.
What we'll ask for
- A schedule of units with asking prices and any reservations or exchanges.
- Your existing loan's redemption figure and expiry date.
- Building control sign-off and a new-build warranty, or the timetable for both.
- Agent's marketing advice on values and expected selling period.
Frequently asked questions
How early should I arrange exit finance?
Start two to three months before your development loan expires. That leaves time for valuation and legals without risking default interest.
Can I release equity from the scheme?
Often, yes. If the completed value is well above your development debt, an exit loan up to the lender's maximum LTV can release some of your profit.
What if some units have already sold?
That's fine. The exit loan is sized on the remaining unsold units, and each sale pays down part of the loan.