Development finance
Development finance is a short-term loan for building or substantially converting property, advanced in stages as the work progresses rather than in one sum, and sized against the gross development value of the finished scheme. It is the product a landlord moves to when a project is too heavy for a bridging loan: ground-up construction, a conversion of a house into flats, a commercial-to-residential change of use, or a structural refurbishment running beyond about six months.
How it is sized
Lenders lend a percentage of gross development value, commonly up to 60% to 65%, and a percentage of total costs, commonly up to 85% to 90%, with the borrower funding the balance, usually the land. The first drawdown covers the land or existing property; subsequent drawdowns fund the works, released against certificates from a monitoring surveyor the lender appoints, who inspects and confirms the value of work completed. Interest is rolled up and repaid at the end, so the loan grows through the term; terms run from 12 to 24 months, with a development exit bridge available where the scheme is finished but not yet sold or refinanced.
What lenders require
Planning permission in place; a costed schedule of works from a contractor, with a contingency of 10% or more; a build programme; proof of the borrower's experience or an experienced contractor; the exit strategy, by sale or refinance on to buy-to-let; and, for a company borrower, personal guarantees from the directors. Development finance to a special purpose vehicle is unregulated.
How it differs from bridging
A bridge is advanced in one sum against current value and suits light or medium refurbishment; development finance is advanced in stages against future value and carries the monitoring cost, arrangement fees at each end and a higher all-in rate, in exchange for funding works that no bridge would. The lenders active in both, United Trust Bank, Shawbrook, LendInvest, Octopus Real Estate and Hampshire Trust Bank among them, are compared in the best bridging loan lenders for landlords.
From working with landlords across the UK who have moved from refurbishment to development, the cost that surprises them is not the rate; it is the monitoring surveyor's fee at every drawdown and the delay while each certificate is issued, which the programme must allow for. Converting a property to an HMO is where most landlords first meet the product; run the finished scheme through the buy-to-let investment calculator with the finance cost included before the land is bought.
Last reviewed: September 2026.
