The UK property market offers plenty of opportunities for development, but turning an empty plot into a finished building takes more than just vision – it takes proper funding.
Many property professionals and investors find themselves stuck between their development plans and the reality of securing the right finance. Standard mortgages don’t quite fit the bill when you’re starting from scratch, and that’s where ground up finance comes in.
Understanding how ground up finance works can be the key to moving your plans forward. This type of funding helps bridge the gap between buying land and completing construction, offering a more flexible approach than traditional property finance.
Whether you’re planning a single house build or a larger development project, continue reading to find out exactly what to expect and how to get started.
What is Ground Up Finance?
Ground up finance is a specialised form of lending that funds new property developments from scratch.
Rather than helping you buy an existing building, it covers everything from the “ground-up”; purchasing bare land through to completing your new build.
Think of it as a complete funding package that grows with your project – from the moment you acquire the plot until you put the finishing touches on your development.
This type of finance works quite differently from mortgages or bridging loans.
With a regular mortgage, you’re borrowing against an existing property with a known value. But when you’re building from the ground up, lenders need to look at what your project will be worth once it’s finished – they call this the Gross Development Value, or GDV for short.
You can borrow from £250,000 up to £250 million, depending on your project’s size and scope. The amount you can access usually depends on two main factors: how much experience you have as a developer and the expected value of your finished project.
In the UK market, you’ll find several ways to structure ground up finance:
Development finance gives you the most comprehensive funding option.
You’ll receive money in stages as your project progresses, matching the natural flow of construction costs. This helps manage cashflow and reduces the interest you pay.
If you already own your plot but need money to start building, construction finance might be your best bet. It focuses purely on the build costs, which can make it more straightforward to arrange.
Some developers combine different types of finance – perhaps using a bridging loan to buy the land quickly, then switching to development finance for the construction phase.
Here’s how it looks in practice: Say you’re planning to build a small block of flats.
A commercial mortgage wouldn’t work because there’s no existing building to lend against.
With ground up finance, your lender looks at your plans, calculates what the flats will be worth when they’re built, and offers funding based on that future value. They’ll release the money in chunks – first for the land purchase, then for groundworks, then as each major construction phase completes.
Remember – while this finance offers more flexibility than traditional property lending, it also requires more planning and preparation. You’ll need to show lenders exactly how you’ll use the money, how you plan to pay it back and when.
Let’s talk development finance!
Who Uses Ground Up Finance?
You’ll find ground up finance being used across the property sector by a wide range of people and businesses.
Professional property developers and building firms make up a large portion of ground-up finance users.
They rely on this funding to build anything from a pair of semi-detached houses to entire apartment blocks. One of our clients recently used ground up finance to transform an empty plot in Hampshire into 14 houses- exactly the kind of project where staged funding makes perfect sense.
Business owners often turn to ground up finance when they want to build their own premises.
Whether it’s creating a new office building, warehouse, or retail space, building from scratch can work out more cost-effective than buying or renting existing property. A manufacturing company in Leeds, for instance, used ground up finance to build a bespoke factory that perfectly matched their production needs.
Property investors who’ve done well with buy-to-let are increasingly looking at development as their next step. Ground up finance helps them move from simply buying properties to creating them. We recently worked with an investor who used this type of funding to build four townhouses on a plot that previously held just one dated bungalow.
First-time developers can access ground up finance too, though they’ll need a good, solid plan.
What matters most isn’t always your development experience – it’s having a well-thought-out plan and the right team around you. From small family homes to major commercial developments, ground up finance can work for any size project as long as the numbers add up.
How Ground Up Finance Works
Understanding how ground up finance works helps you plan your development more effectively.
Let’s break down the key elements that make this type of funding unique.
The Funding Structure
Unlike a loan where you receive all the money at once, ground up finance releases funds in stages. This staged approach matches the natural progress of your build, helping you manage costs more effectively.
You’ll usually receive your first payment to help you buy the land.
After that, the lender releases money at key points in your build – perhaps when the foundations are complete, when the building is watertight, or when specific construction phases finish. Each of these releases is called a drawdown.
Before each drawdown, the lender’s surveyor visits your site to check progress. They make sure everything’s on track and built to the agreed standards. Once they’re happy, they give the go-ahead for the next payment.
Most lenders will fund up to 70-75% of your land costs and up to 100% of your build costs.
This means you’ll need some money of your own to start with – usually at least 25-30% of the land price. The total amount you can borrow depends on your project’s GDV (Gross Development Value – what it will be worth when complete).
Project Timelines
Most ground up finance agreements run from 12 to 36 months. Your timeline might look something like this:
- Month 1-2: Purchase land and finalise building contracts
- Month 2-3: Site preparation and foundations
- Month 3-6: Main structure and roof
- Month 6-9: Internal works and services
- Month 9-12: Finishing works and landscaping
Here’s a real example from a recent project in Bromley: A developer built three townhouses over 13 months. They drew down funds at five key stages:
- First drawdown: Land purchase
- Second: After groundworks and foundations
- Third: When the buildings were wind and watertight
- Fourth: After first fix and plastering
- Final drawdown: On completion
Remember that weather, supply delays, or contractor availability can affect these timelines. That’s why most lenders build some flexibility into their agreements. They understand that construction projects rarely run exactly to schedule.
Your payment schedule links directly to these project stages. You’ll need to submit drawdown requests about two weeks before you need each payment, giving the lender time to arrange their site visit and process the funds.
Requirements for Ground Up Finance
Let’s look at what you need to have in place before applying. Getting these elements sorted early makes the whole process smoother.
Essential Criteria
Planning permission heads the list of must-haves. You’ll need at least outline permission before most lenders will consider your application. Some might offer terms subject to planning, but they won’t release any money until you have full approval.
Your experience level matters, but perhaps not as much as you’d think.
While seasoned developers might find it easier to borrow, many lenders will look at first-time developers. What counts is showing you understand what you’re taking on. If you’re new to development, bringing in experienced contractors and project managers can help balance your lack of direct experience.
You’ll need some cash of your own to put into the project. Most lenders ask for at least 25-30% of the land cost. They’ll also want to see you have enough extra funds to cover unexpected costs – what they call a contingency buffer.
Having the right professional team makes a big difference to your application, and gives lenders confidence. This means qualified architects, structural engineers, and contractors. Their track records and professional credentials help convince lenders your project is in good hands.
Documentation Needed
Your project plans need to be detailed and professional.
This means architectural drawings, construction specifications, and a clear schedule of works. Lenders want to see you’ve thought through every stage of the build.
Cost breakdowns should cover everything from buying the land to the final coat of paint. Include quotes from your contractors and suppliers, and don’t forget to factor in professional fees.
Make these figures as accurate as possible – underestimating costs is a common mistake that can cause problems later.
You’ll need to show all your planning paperwork, including the full application, approval notices, and any conditions attached. If there are special requirements – like environmental surveys or archaeological reports – have these ready too.
Your professional team’s qualifications and past project examples help support your application. Include their professional registrations, insurance certificates, and examples of similar projects they’ve completed successfully.
Development Exit Finance – A Smart Way to Complete Your Project
When you’re nearing the end of your development project, you might find development exit finance gives you some welcome breathing space.
It’s a specific type of loan that helps developers refinance their existing development loan when their project is almost complete.
Let’s say you’ve built your properties and they’re about 90% finished.
At this point, you can switch from your original development finance to a development exit loan. This often makes sense because exit loans come with lower interest rates – after all, most of the building work is done, so there’s a lot less risk for the lender.
You can use development exit finance in several ways.
Perhaps you want more time to sell your properties without feeling rushed. Maybe you’d like to release some equity to start your next project. Or you might simply want to reduce your interest costs while you’re finishing up the final details.
The amounts available range from £250,000 to £25 million and beyond.
Most lenders look for your project to be wind and watertight before offering this type of finance. You’ll need a clear plan for how you’ll pay back the loan – usually through property sales or refinancing to a long-term mortgage.
Here’s a practical example: A developer in Harrow built two blocks of apartments. As they approached completion, they switched to development exit finance. This gave them an extra 12 months to sell the units at the right price, rather than having to accept lower offers to meet their original development loan deadline.
The benefits are straightforward:
- Lower interest rates than development finance
- More time to achieve the best sale prices
- Option to release equity for your next project
- Flexibility with repayment terms
- No exit fees with some lenders
Keep in mind that you’ll need to factor in new arrangement fees and legal costs. But if your development is nearly complete and you need more flexibility, development exit finance could be worth considering.
Working with a Broker
Getting this type of development finance isn’t at all like arranging a regular mortgage.
The process needs specialist knowledge, and that’s where a broker proves invaluable. At Bridging Finance London, we work with over 250 lenders, from high street banks to private individuals who lend their own money.
A good broker brings more than just lender contacts though.
We look at your whole project, spot potential issues early, and know which lenders will be the best fit.
For example, we recently helped a developer who’d been turned down by their bank. We knew a specialist lender who focused on their type of project and secured approval within a week.
Brokers can often get you better terms, along with a more bespoke lending facility.
We recently saved a client £12,000 in arrangement fees because we knew which lender would be most competitive for their situation. Plus, we handle all the paperwork and negotiations, leaving you free to focus on your project.
Next Steps
Ready to explore ground up development finance?
Here’s how to move forward:
- First, sketch out your project basics – what you want to build, where, and rough costs. This helps us give you meaningful advice from the start.
- Get your paperwork together – planning permission, project plans, and proof of your own funds. Even draft versions help us assess your options.
Book a chat with us before you commit to anything.
We’ll look at your plans, explain your options, and give you a clear idea of costs. We can spot potential problems early and suggest ways around them.
FAQ
The minimum loan amount for our lenders is £250,000.
You need at least outline planning permission to secure funding. Some lenders might offer terms subject to planning, but won’t release funds until full permission is granted.
Yes, if you have a strong business plan and experienced professionals on your team. Experience in related fields like architecture or construction will help.
Key team members include an architect, quantity surveyor, structural engineer, and main contractor. All should have relevant qualifications and experience.
Funds are released in stages following site inspections. These usually align with key construction milestones like completion of foundations, roof, etc.
Read more: Development Finance Staged Payments: How Do They Work?
Yes, it’s available for both commercial and residential developments. Commercial projects might need additional feasibility studies.
Read more: How to Finance a Commercial Property Purchase in the UK
A bridging loan can certainly be used for the initial land purchase, but it’s not the right solution for a staged development from scratch.
Read more: Are Property Development Finance and Bridging Loans the Same?
