If you’re a property developer with an ongoing project, you might be wondering if you can refinance before the site is finished.
The answer is normally yes – and switching lenders mid-project could significantly improve your position.
Why Change Lenders Mid-Development?
Development projects rarely go completely to plan.
Your current lending arrangement may not be working as well as it should and there are many good reasons to refinance before completion.
Many developers find better interest rates in the market today. We recently refinanced a client and reduced their monthly interest payments by 35% saving them thousands over the remaining life of their project.
Your current lender’s terms may be restrictive, especially around project changes or sales timing. New lending arrangements often have more flexible terms that better suit your project’s changing needs.
Construction delays, supply chain issues and planning complications can push completion dates beyond your original loan term. Rather than rushing to finish under pressure, refinancing gives you the extra time to finish the project properly.
You may see an opportunity for a new project before you complete your current one. Refinancing can release equity from your partially completed development and give you the funds to pursue new opportunities without having to wait for sales.
When costs blow out, refinancing through a new lender can improve your cash flow. One of our clients saved over £25,000 a month by refinancing, giving them some much needed breathing space in their development budget.
Solutions for Mid-Development Refinancing
Development exit finance has become a popular option for refinancing incomplete projects.
This type of finance has much lower rates than standard development finance – many of our clients see interest rate reductions of 25-40%.
The terms you’ll get will depend on your project’s progress, location and overall viability.
A residential project in London at 90% complete may get development exit finance at 65% loan to value (LTV). A regional commercial project at 75% complete could get 70% LTV from a specialist bridging lender.
Read more: How to Lower Your Development Loan Costs Before Final Repayment
Real-World Example
A recent Manchester development of 12 apartments.
The original loan term was up and construction delays pushed the completion date back 4 months. The developer needed a solution.
By refinancing to a development exit loan they reduced their monthly costs by 30% and got the extra time to finish and sell the units properly.
How Development Exit Finance Works
Development exit finance is a useful and practical solution for refinancing incomplete projects.
Beyond lower interest rates, these loans offer flexible loan sizes from £250,000 to £25 million+. Terms are 3 to 24 months and LTV up to 80%.
The savings can be huge.
When we refinanced a £1 million development loan for a client, they reduced their monthly interest charges by £8,000, giving them much needed breathing space in their project.
This type of finance gives you time to finish your project without the pressure. You can release equity for new projects before you finish all sales and reduced monthly costs improve overall cash flow.
Bridging Finance for Nearly Complete Sites
Short-term bridging finance offers another practical solution for developments approaching completion.
This type of lending works particularly well when you’re in the final stages of your project but need additional funds or time before securing your long-term exit.
You might find bridging finance useful if your development is between 85% and 95% complete.
For example, we recently helped a developer secure a 9-month bridging loan for their apartment block when they needed extra funds for final fixtures and marketing.
The short-term nature of bridging finance meant they could complete the project and begin sales without committing to long-term lending.
Bridging loans offer several advantages for nearly complete sites:
- Quick access to funds, often within 5-10 working days
- Short terms of 3-18 months
- No early repayment fees with many lenders
- Interest can be rolled up into the loan
- Flexible approach to exit strategies
The amount you can borrow through a bridging loan depends on the current value of your development and your exit strategy.
Many lenders will consider lending up to 75% of the current market value, with some offering higher LTV ratios when there’s additional security or strong pre-sales in place.
Lender Requirements
Most lenders want to see significant progress before they will refinance.
They will look at:
- Your completion level (90% or higher)
- Your route to practical completion
- Your exit strategy
- Your development track record
But these are not hard and fast rules.
We recently refinanced a client at 85% complete because they had strong pre-sales and a good development track record.
To gain the largest savings, your site ideally needs to be at an advanced stage. This lowers the lending risk, which leads to better rates and terms.
The Process
Refinancing an incomplete development is often easier than getting your original development finance.
You’ll need an updated project assessment including completion costs and projected end value. A new valuation helps lenders see both current and final gross development value.
The legal work moves fast as the property is registered and most searches are done. With preparation, completion can be in 10-15 working days.
Solutions to Common Problems
Projects below 90% complete can still refinance, especially with strong pre-sales or proven track record. We recently refinanced an experienced client at 80% complete by showing buyer interest and a detailed completion schedule.
Planning changes don’t have to stop refinancing. We’ve funded clients with minor planning changes by structuring the loan to be flexible.
Costs
When refinancing, always look beyond the headline interest rate
Factor in arrangement fees (1-2% of the loan amount), valuation costs and legal fees for both sides. Check for any early repayment charges on your existing loan.
These costs are small compared to the savings. A recent client saved £100,000 in interest over 12 months on their £2 million development loan, even after all refinancing costs.
Your Decision
Look at total cost savings versus fees and charges. Consider your timeline needs and whether a short extension or longer term solution would work better.
Think about your next project – can you release equity now and create new opportunities?
Property development success is about optimising your financial position throughout the project. Refinancing an incomplete project isn’t just about solving immediate problems – it’s often a strategic move to increase profitability and growth.
With access to over 250 lenders and years of experience in development refinancing we at Bridging Finance London can help find the solution for your project.
Our experts will be able to look at your options and calculate what savings are achievable.
Get in touch to talk through your requirements and options.
