How development finance is drawn and charged
UK development finance usually releases money in two parts. A day-one advance helps buy the site, often a share of the land price. The build facility is then released in stages as the work progresses, normally after a monitoring surveyor confirms each stage. You pay interest only on money that has actually been drawn, so a loan drawn late in the build costs less than the same facility drawn at the start.
This calculator draws the land advance at the start of month one. It splits the build facility into one tranche per build month, each drawn at the start of that month. Even draws release equal amounts. Front-loaded draws release more early: with a four-month build, the tranches are 40%, 30%, 20% and 10% of the facility. Back-loaded draws reverse that order. After the build, the whole loan stays outstanding through the sale or refinance period you enter.
Most UK development lenders roll interest up rather than collect it monthly. The interest is added to the debt and repaid from sales or a refinance at the end. Choose Rolled up, compound if interest is added to the balance each month and itself attracts interest. Choose Rolled up, simple if interest is charged only on the money drawn. Choose Paid monthly if you service the interest yourself.
Loan to cost and loan to GDV
Lenders limit a development loan in two ways and the lower result wins. Loan to cost compares the total loan with land plus build costs. Loan to GDV compares the debt with the finished value. Typical UK terms often quote loan-to-cost limits of around 65% to 80% and loan-to-GDV limits of around 60% to 70%, but every lender sets its own.
Many UK lenders measure loan to GDV on the gross loan: the money drawn plus rolled-up interest and the exit fee. This calculator does the same on this page, so a longer term or a higher rate can push a scheme over its GDV limit even when the land and build loan has not changed. The Lender limits result tells you whether your figures are within both limits you entered, or which one they exceed.
Fees in a development finance quote
The arrangement fee is a percentage of the total loan, often 1% to 2%, and this calculator treats it as paid at the start rather than added to the loan. The exit fee is charged when the loan is repaid. Some lenders base it on the loan and some on the GDV, so pick the basis your quote uses: 1% of a £1.8 million GDV is £18,000, while 1% of a £1 million loan is £10,000.
Enter broker, valuation, monitoring surveyor and legal costs under Other finance costs. They are added to the total cost of finance and reduce your profit, but they are not added to the loan or charged interest.
Worked example: a 12-month UK build
A developer buys a site for £500,000, with build costs of £750,000 and a GDV of £1,800,000. The lender advances 50% of the land price on day one, which is £250,000, and funds 100% of the build costs, which is £750,000, in 12 even monthly tranches of £62,500. The total loan is £1,000,000, which is 80% of the £1,250,000 land and build cost.
At 0.9% a month, rolled up and compounded monthly, with a three-month sale period after the build, interest comes to £102,985.91. Adding the 2% arrangement fee of £20,000 and a 1% exit fee on the loan of £10,000 gives a total cost of finance of £132,985.91. The balance to repay at exit is £1,112,985.91, which is 61.8% of GDV, so the scheme sits within an 80% loan-to-cost limit and a 65% loan-to-GDV limit.
Profit after finance is £417,014.09, which is 30.2% profit on cost. If the same interest were rolled up simply instead of compounded, interest would be £97,875.00, because each drawn pound is charged 0.9% for each month it is outstanding without interest on interest.
What this calculator does not decide
This is a cost estimate for a quote you already have, not an offer or an approval. Lenders also look at your experience, planning consent, the build contract, contingency, the exit strategy, valuation and their own appraisal. Real drawdowns follow the build programme and surveyor sign-off, so actual interest can differ from an even or tapered pattern.
Most UK development finance for companies and investors is commercial lending and is not regulated by the Financial Conduct Authority. A loan on a home you or your family will live in can be a regulated mortgage with different rules. Check the facility letter, and take independent advice before committing.
Use the right country page
This page stays in pounds and uses UK development finance terms: a monthly rate, rolled-up interest, an arrangement fee and loan to GDV on the gross balance. The country choices above the inputs open separate local pages. Choosing United States opens the US construction loan calculator, which uses an annual rate, origination points, an interest reserve and loan to ARV on the loan amount. The inputs reset and amounts are not converted.
If you are buying a site or property before planning or works start, the UK bridging finance calculator prices a short-term loan without staged build draws.
For a residential site purchase, estimate the property tax with the Stamp Duty calculator for England, Northern Ireland, Scotland and Wales. Land without dwellings or mixed-use sites can be taxed at non-residential rates instead.
Inputs for the development finance calculator
Land or site purchase price
The price of the site before finance. Enter zero if you already own it and are borrowing only for the build.
Build costs
All construction costs, including professional fees and contingency. Lenders usually expect a contingency of around 5% to 10% of the build.
Gross development value (GDV)
What the finished scheme is expected to be worth, usually from the lender's valuation of the completed units.
Land advance
The share of the land price lent on day one. Many lenders advance part of the purchase price, so you fund the rest from your own cash.
Build costs funded
The share of build costs the lender releases in stages. Some lenders fund 100%; others expect you to fund part of each stage.
Quoted interest rate
The interest rate in your quote, not the APR. UK development finance is often quoted per month, for example 0.9%.
Rate quoted per
Choose Month for a monthly rate. Year (nominal) divides an annual rate by twelve to get the monthly rate.
Build period
The number of months over which build funds are drawn. One tranche is drawn at the start of each build month.
Sale or refinance period
Months after the build when the full loan is still outstanding, while units sell or a development exit loan is arranged.
Draw pattern
Even releases equal tranches. Front-loaded tapers from large to small and back-loaded from small to large, in straight-line steps.
How interest is paid
Rolled-up interest is added to the debt and repaid at exit, either compounded monthly or simple. Paid monthly means you service the interest as it falls due.
Arrangement fee
A percentage of the total loan, paid at the start. This calculator does not add it to the loan.
Exit fee
A percentage charged when you repay. Enter zero if your quote has no exit fee.
Exit fee based on
Whether the exit fee is a percentage of the total loan or of the GDV. Check the facility letter.
Other finance costs
Broker, valuation, monitoring surveyor and legal fees you pay separately. They are added to the cost of finance, not to the loan.
Lender loan-to-cost limit
The highest loan the lender allows as a percentage of land plus build costs.
Lender GDV limit
The highest loan to GDV the lender allows. On this page it is compared with the gross balance at exit, including rolled-up interest and the exit fee.
CALCULATOR QUESTIONS
UK development finance calculator questions
Why is the interest lower than the rate times the full loan?
Because the build facility is drawn in stages. Each tranche is charged only from the month it is drawn, so most of the build money is outstanding for less than the full term.
Should I choose simple or compound rolled-up interest?
Use the method in your facility letter. Compounded monthly means interest is added to the balance each month and is itself charged interest, which costs more over a long term.
What is the difference between loan to cost and loan to GDV?
Loan to cost compares the loan with land plus build costs. Loan to GDV compares the debt with the finished value. Lenders apply both, and the lower limit decides the most you can borrow.
Does this include Stamp Duty and sales costs?
No. Add Stamp Duty and professional fees to your build or land costs if you want them in loan to cost. Profit here is GDV minus land, build and finance costs, before sales fees and tax.
Is development finance regulated in the UK?
Loans to companies and investors for development are usually unregulated commercial lending. Borrowing against a home you will live in can be regulated, so check with your lender or broker.
What happens when I change country?
The United States option opens the separate US construction loan page, in dollars, with its own defaults and terms. Your inputs are reset rather than converted.