Calculator
Development finance calculator
Development lenders size facilities against two caps at once: a percentage of end value and a percentage of cost. This calculator shows which one binds on your scheme, and whether the profit stacks up.
Leverage, pricing and drawdown profiles vary by scheme, experience and location. Send us the appraisal and we will return indicative terms.
How this calculator works
Development finance is sized against two constraints simultaneously. The first is loan to gross development value (LTGDV), the facility as a percentage of what the finished scheme will sell for; senior lenders typically cap this at 60 to 65 per cent, and we use 65 per cent here. The second is loan to cost (LTC), the facility as a percentage of what the scheme costs to deliver; the common ceiling is 85 to 90 per cent, and we use 85 per cent. Your facility is the lower of the two, and the calculator tells you which constraint binds. On tight-margin schemes LTGDV usually bites first; on high-margin schemes it is normally LTC, which is the lender's way of making sure you keep meaningful equity in the project.
Total project cost combines the land, the build, a contingency on the build (we default to 10 per cent, which is what most lenders and monitoring surveyors expect to see) and the finance costs themselves. Interest on a development facility is almost always rolled into the loan rather than serviced, and because the facility draws down in stages as the build progresses, you do not pay interest on the full amount from day one. We approximate this by assuming an average drawn balance of 55 per cent of the facility across the term, which is a reasonable proxy for a typical staged drawdown profile.
The day-one land advance assumes the lender releases 60 per cent of the land cost at completion, with the build element drawn against monitoring surveyor sign-off thereafter. Developer equity is the gap between total project cost and the facility, which you fund in cash or, occasionally, with additional security.
Finally, profit on cost: the projected profit divided by total cost. This is the first number a credit committee looks at. Most lenders want at least 17.5 to 20 per cent, and most decline below 17.5 per cent because there is no margin left to absorb cost overruns or a soft sales market.
You can read how we structure these facilities on our development finance page. Because everything here keys off the end value, it is worth being honest with yourself about the top line; our guide to gross development value explains how lenders and valuers actually assess GDV, and why optimistic figures get found out at valuation.