Development exit finance: cheaper debt while your finished units sell

What a development exit loan actually does

Development finance is priced for construction risk. Once the scheme reaches practical completion that risk has gone, but the facility keeps charging for it, typically 7 to 11 percent a year on senior debt and more on stretched structures, with the clock running towards a maturity date that was set against an optimistic sales programme. Development exit finance is the fix: a new lender, usually a bridging fund or specialist short-term lender, repays the development facility in full and takes a first charge over the completed units while you sell or let them.

The product goes by several names, development exit loan, sales period finance, post-completion finance, but the structure is constant: 6 to 18 month term, interest rolled or retained, no monitoring surveyor, no works element, and a release mechanism that hands the lender an agreed slice of each sale as units go. As of June 2026 it prices at 0.55 to 0.95 percent per month with a 1 to 2 percent arrangement fee.

The three reasons developers refinance at completion

First, the rate. A senior development facility at 10 percent a year costs roughly 0.83 percent a month. Development exit money at 0.55 to 0.95 percent a month annualises to roughly 6.6 to 11.4 percent, so we will be straight with you: at the top of the exit range you save little or nothing on rate alone. The real saving sits in the middle of the market, around 0.65 to 0.75 percent a month against a 10 percent facility, plus what you avoid: extension fees of 1 to 2 percent and default rates of 3 to 5 percent above contract if the development loan runs past term. On £1.5m of debt held for nine months, that gap is routinely £30,000 to £50,000.

Second, equity release. Development facilities are sized against cost; exit facilities are sized against end value, up to 70 to 75 percent of it. The completed scheme is worth more than it cost, so refinancing at completion typically releases cash, and most exit lenders are comfortable with that cash funding the deposit on your next site. It is how repeat developers keep two schemes moving with one balance sheet.

Third, time. A developer selling against a maturing development facility is a forced seller, and agents and buyers can smell it. A fresh 12-month term resets the clock, lets you hold asking prices through a slow quarter, and turns the decision to discount into a commercial choice rather than a covenant requirement.

When exit lenders will take the scheme on

The core market wants practical completion: building control sign-off, the new-build warranty issued, and units physically finished. At that point the lender is taking clean completed-stock risk and prices accordingly.

A smaller pool will complete earlier, from wind-and-watertight, where the structure and envelope are done but second fix, decoration and snagging remain. These lenders hold a retention, commonly the estimated cost of the outstanding works plus a margin, releasing it once PC is certified. Pricing sits at the top of the range and the valuation is done on a completed basis with a cost-to-complete deduction. It is a useful structure when a development facility is maturing before the finish line, but if you are within eight weeks of PC it is usually cheaper to negotiate a short extension and refinance clean.

How much equity a development exit loan releases

Exit facilities run to 70 to 75 percent of the open market value of the finished units, on an aggregate basis. The arithmetic is simple: maximum facility minus development debt being redeemed, minus arrangement fee, legal costs and any retained or rolled interest, equals cash released on day one. Because development facilities are constrained to 60 to 65 percent of GDV, there is almost always headroom, and on a scheme that has gained value through the build the headroom can be substantial.

Lenders will ask what the released cash is for. "Deposit on the next site, terms agreed" is an answer that improves your pricing; vagueness does not. We package the onward purchase alongside the exit so the lender sees one coherent plan.

Part-sales mechanics: release pricing and minimum amounts

The release schedule is where exit facilities are won and lost. Each unit carries an allocated debt figure, and on sale the lender takes a release amount, typically set at 110 to 125 percent of allocated debt, or 100 percent of net sale proceeds, whichever the term sheet specifies. A 110 percent release price means meaningful cash from each sale flows back to you as the facility deleverages; at 125 percent, or on a 100-percent-of-proceeds sweep, you see little until the loan is substantially repaid.

Watch for minimum release amounts and disposal covenants too: some lenders set a floor price per unit below which you cannot sell without consent, and some require a minimum number of sales per quarter. These are negotiable at term-sheet stage and effectively fixed afterwards, so we negotiate them first, alongside the rate rather than after it.

Development exit versus holding the units on term debt

Exit finance assumes you are selling. If the better trade is to keep the scheme as rental stock, the comparison changes: a completed block can refinance straight onto term debt, an MUFB mortgage if it stays on one freehold title, or individual buy-to-let mortgages if the titles are split. Term debt is cheaper than exit money and runs for years, not months, but it sizes on rental cover rather than asset value, so the leverage is often lower than a 75 percent exit facility.

The common hybrid is to sell some units and keep the rest: an exit facility carries the whole scheme through the sales period, then the retained units refinance onto term debt once the sold units have cleared the short-term loan. We model sell-all, hold-all and the hybrid on every completed scheme, because the right answer is arithmetic, yield against sale price against tax position, not a preference.

Worked example: £2.4m GDV scheme, £180,000 released

A developer completes an eight-unit conversion with a GDV of £2.4m, funded by a £1.5m development facility at 10 percent a year that matures in three months. Four units are under offer, four are freshly listed, and the developer has terms agreed on the next site, needing £150,000 of deposit.

We place a development exit facility at 70 percent of value: £1,680,000. It redeems the £1.5m development loan, absorbs the 1.5 percent arrangement fee and legals of roughly £29,000 inside the facility, and releases just over £180,000 in cash on day one, covering the next site's deposit with margin. Pricing is 0.69 percent a month, interest rolled, against the 10 percent facility being left behind, roughly 0.83 percent a month, plus the 1.5 percent extension fee the incumbent lender had quoted to extend.

The release price is agreed at 110 percent of allocated debt, £231,000 per unit against £210,000 allocated. The four units under offer complete across the first three months, cutting the balance to about £760,000, and the remaining four sell over the following six months at full asking price, with no maturity pressure forcing a discount. Total interest cost across nine months runs to roughly £75,000, against a projected £105,000-plus on the extended development facility, and the next site exchanged in week five rather than waiting for the first scheme to sell out.

Frequently asked questions