Development exit finance is a bridging loan taken when a scheme is finished, or nearly finished, to repay the development lender. It replaces a facility that is usually more expensive, often about to expire, and often charging more the longer it runs, with a cheaper loan that gives you time to sell or let the units at the right price instead of in a hurry. Done well, it can also release some of your profit early for the next site.
It is for developers and investors, companies and experienced individuals, never for a home you or your family will live in.
Lenders price development exit on how finished the scheme is.
The exit lender’s valuer will value each unit on comparable sales of new and recent homes nearby, not on the price list. Expect questions on reservations, the sales agent’s view, how long similar schemes have taken to sell, and any units already sold or under offer. A scheme with sales evidence of its own, missives concluded on some units, is a much easier case. Price the units realistically: a valuation below your list price reduces the loan and lengthens the term you need.
Two pieces of paper matter more than anything else on a Scottish scheme.
Development exit lenders check both, along with the building warrant and any planning conditions. Have them ready.
Where the exit loan is larger than the balance on the development facility, the difference can come back to you after costs. That depends on the end value of the unsold units, the lender’s loan to value limit and what is owed. Releasing too much makes the exit loan harder to repay from sales, so most developers take a measured amount and keep a margin.
Gaps in that list are the usual reason a development exit takes longer than planned. Gather it while the builder is still on site.
Usually from sales: as each unit sells, most or all of the net proceeds go to the lender until the loan is cleared. Units you keep are refinanced onto buy to let or commercial loans. Agree the release price per unit at the start, so you know what each sale repays.
In Scotland each sale goes through missives and settles on its date of entry. On settlement the release price is paid to the exit lender and its standard security over that unit is discharged, so the buyer takes a clean title. Allow for buyers whose own lenders take weeks to issue their offers.
Illustrative, not a completed 9ROK deal.
A developer has built four houses in Fife, each expected to sell for about £350,000, so the end value is £1,400,000. The scheme has reached practical completion with completion certificates and warranties in place, and £850,000 is owed to the development lender, whose facility expires next month.
Monthly interest, an arrangement fee, valuation of the units, legal fees on both sides and sometimes an exit fee. The ranges are on our bridging finance page, and the bridging loan calculator costs the loan over the term you expect.
Indicative only. Property given as security may be repossessed if the loan is not repaid, and most lenders ask directors for personal guarantees.
Some lenders will lend once the scheme is wind and watertight with the remaining works costed and funded; most want practical completion, or very close to it. The less work left, the more lenders will look at it and the keener the pricing.
Usually 6 to 24 months, long enough to sell or let the units at the right price. The term should match a realistic sales period for your location, with headroom.
Often, where the exit loan is larger than what is owed to the development lender. The amount depends on the end value, the units still unsold and the lender's loan to value limit.
For buyers who need a loan, almost always. Their lenders expect a recognised structural warranty or a professional consultant's certificate on new homes, and your exit lender will want to see it is in place.
Send the scheme, the end values, what is owed and what is left to do. One working day to an honest view on the exit.