Development finance calculator
If you’re a property developer or someone in the construction business, property development finance is something you need for major projects such as construction, large-scale refurbishment, and repurposing.
What exactly is development finance?
Development finance is defined as short-term funding availed specifically for the development of projects such as property, new builds or commercial developments.
On paper, it is similar in principle to a bridging loan: a short-term loan given out for the duration of the build.
Upon completion of the project, the loan is paid off through the sale of the developed or built property or via refinancing. In case of default by the borrower, their home may be repossessed.
why you need development finance
If you think you have enough funds to be able to cover the cost of a developmental project, taking out bridging finance for it is still an option. It offers a number of advantages, such as:
- Go bigger. You can go bigger with projects that you would not usually be in a position to accept or even consider. Development finance allows property developers to take on bigger projects in order to increase their potential profits.
- Frees your finances. It keeps your finances free, as a large percentage of your money on hand (or in the bank) doesn’t have to be tied up until you’ve sold or leased out the finished property.
- Development finance lets you get more things done. You can take on multiple projects all at once without having to wait until a current project is sold. That way, you don’t miss out on potentially profitable opportunities.
- Consider how less capital = a bigger return on investment (ROI.) You may pay for the cost of financing from your eventual profits, but putting in less of your own capital also means that the actual rate of return for the amount you invested into the project will come out much higher.
How do I calculate development finance rates?
This is where our development finance calendar comes in. Having this tool at your fingertips enables you to compute the gross loan amount.
Our online calculator also helps you determine how much you will need for your project and see if it will be substantially profitable for you in the long run. It will also allow you to compare various rates depending on different variables and see what options are available to you.
Using this calculator will give you a comprehensive development financing quotation that will present values for the following items:
- Interest charges;
- Assorted fees, including facility costs, exit fees, valuation, quantity surveyor (QS) charges, as well as those from lenders and legal costs;
- Gross development value (GDV;)
- Tax refunds, particularly from VAT;
- Cost of profit after finance;
- Total cost of finance;
- Total project cost;
- Development profit; and
- Return on cost calculations.
how do I use the Development Finance Calculator?
All you need to do is fill in the boxes with your information, then click CALCULATE to see the results instantly.
If you need to compare different options to how these will impact the overall profitability of your project, you can go back and edit the information to see different outcomes based on the changes you made to the figures. This enables you to make informed decisions before you speak to us regarding a development financing loan.
What Information Do I Need to Supply?
You will be asked to supply information for the following:
- Total Net Loan Amount Required: Not to be confused with the gross loan amount, this is the total amount you need your lender to release. This value includes the day one release which you will need to purchase the site or property, along with any and all subsequent releases. Note, however, that you do not need to input interest charges, as this will be generated by the calculator.
- Loan Term Required: For this, enter the loan term in months, not in weeks.
- Land Cost or Residual Value: If you are buying the area for development, enter the purchase price. If you already own it, simply enter the residual value. In doing so, you can tell if you stand to make a bigger profit developing the project or by selling off the property upon completion.
- Stamp Duty: This refers to the amount of stamp duty that needs to be paid or considered. If you aren’t sure how much to put in with regard to stamp duty, refer to our stamp duty calculator to get the precise amount.
- Amount Available from Customer: This refers to the amount of capital you intend to put into the development.
- Total Build Cost: This refers to the total cost of construction, inclusive of all project costs aside from the land value, stamp duty, and financial costs. You may make an itemised list of inclusions in the OTHER COSTS section of the development finance calculator.
Other relevant data needed
- GDV Amount: How much do you expect from this development in terms of Gross Development Value upon completion? In case you intend to sell the finished development, enter the estimated Gross Development Value at the point of intended sale.
- Prime Funding: Also referred to as the Initial Release, this asks for the funds you require for the initial loan release.
- Calculated Interest: By default, we have set this per annum. If your loan term is much shorter, you can set the parameters to compute for monthly interest.
- Interest Rate: The default setting is at 7%, based on the &% per annum formula. You may change this to your required interest rate and look at both to make a comparison.
- Releases: This involves how much funding you need and when will you need it. Interest is charged on funds that have already been released. You can compare rates through this section by changing the amount and time frame for your releases. This will show you changes in the amount of interest and overall profitability of your development.
Standard Development finance Fees
Aside from those mentioned above, our development finance calculator will also require you to add values for fees, VAT claimback and, as stated earlier, other costs.
When it comes to fees, the two most important for our finance calculator are the facility fee and the exit fee.
The facility fee is a percentage of the total loan facility. In our development finance calculator, this is set at 1%. You may, however, change this to be able to make comparisons.
The exit fee, on the other hand, can be either a percentage of the gross loan facility or the GDV. As with the facility fee, the exit fee is set at the default value of 1% which you can change in order to compare results.
Other standard fees that may be charged in the context of a development financing loan include QS, Valuation, and Legal fees. Note that the amount charged for these will vary depending on the lender; the results you will see in our calculator are merely estimates based on our own rates.
Other Costs you may incurr
In this section, you can add an itemised list of relevant expenses which weren’t listed in the TOTAL BUILD COST section of the calculator.
This enables our system to calculate estimates for development profit and returns on investment (ROIs.)
VAT Claim VAT back on developments and new builds
This is where the details go if you can claim back any VAT collected.
Any VAT you can claim back helps decrease the overall cost of your development project. It will also increase the amount of profit and ROIs.
What Figures Will I Get in the Results?
The loan amount will vary depending on the information you’ve filled in the calculator. Nevertheless, our development calculator will compute a quotation for you with the following items:
- Monthly interest charges based on the number of months for development. This appears with a running total of the gross loan amount at the end of each month covered. The value is based on the facility fee, monthly loan releases in the stated amounts, as well as standard interest charges;
- Net Loan Amount – The net loan amount requested which includes the initial and subsequent releases;
- Facility Fee;
- Total amount of interest charged for the transaction;
- Estimated QS Costs;
- Gross Loan Amount, essentially the sum of the Net Loan Amount, Facility Fee, and Interest Charges;
- Estimated Valuation Costs;
- Exit fee;
- Redemption Loan Amount, which is the sum of the Gross Loan Amount and the Exit Fee;
- Estimated Legal Lender Costs; and
- Statement of other costs based on additional information given.
Development Finance Calculator: Conclusion
Note that the values given by the calculator are all estimates based on the information you’ve shared with our system.
To get a quotation tailor-made to your specific requirements, it would be best to get in touch with us. Learn more about what we can do for you in terms of development financing and what we can do for you.
Please call us now on 0808 301 9509 or contact us here.