Ground-Up New Build Development Finance
From seasoned housebuilders to first-time developers, ground-up residential development is where our team has lived and breathed, having worked with and for new build developers for nearly two decades. Our expertise in this area makes us a unique partner who can not only source your development finance (also sometimes referred to as a property development mortgage), but also support and guide you through other areas of your project. Whether you're just looking for a sharp term sheet from a lender, or more rounded support navigating the moving parts, we will help you secure funding with confidence and deliver your new build scheme from site acquisition to successful exit.
What Is Ground‑Up Residential Development Finance?
Think of ground‑up development finance as purpose‑built funding designed to cover the costs of buying a site and building out homes from bare earth through to handover. These are no traditional mortgage products - it’s a construction‑first facility aligned to your project, drawdowns, milestones, and exit. These specialist loans are designed to deal with site acquisition, paying contractors, handling variations, and driving toward sales or refinance. Many ground-up developments are commonly multi-unit projects, and are approached differently to other forms of development finance, such as heavy refurbishments.
Typical Development Finance Structures
Lenders follow a senior debt model in the majority of cases, meaning that the lender takes the highest priority debt position through security. For larger or more capital‑intensive schemes, it may be possible to layer in stretched senior or mezzanine finance to reduce your equity input.
Senior Debt
Most schemes will fit a senior debt model. The structure is straightforward, the monitoring is predictable, and the lender knows exactly how the project flows from purchase to completion. If a client only needs traditional leverage and has the equity to support the scheme, senior debt keeps things the most simple and cost‑effective.
Stretched Senior Debt
Stretched senior is popular because it keeps the deal tidy: one lender, one set of legals, and one monitoring surveyor. Developers often choose stretched senior when they want to reduce their equity input but still value simplicity. Due to the added risk profile for the lender, it does tend to cost a bit more than traditional senior debt, but it avoids the complexity of adding a second charge lender into the mix.
Mezzanine Finance
Mezzanine funding is more expensive because it takes more risk, but it can unlock opportunities: a developer might take on a second scheme, move faster on a land opportunity, or simply keep liquidity for planning gain or early‑stage deals. When used sensibly, mezzanine finance can be a strategic tool rather than just an extra layer of borrowing.
LTV, LTGDV & LTC
Loan‑to‑Gross Development Value (LTGDV) compares the total facility to the end value of the completed scheme (the combined value of the units). For ground‑up residential development finance, LTGDV commonly ranges around 60–70%, depending on scheme risk, location, and your experience. Higher LTGDV can be possible on lower‑risk projects, highly liquid stock with strong pre‑sales, or via stretched senior.
Loan‑to‑Cost (LTC) measures the facility against your total project costs - land and acquisition costs, professional fees, build costs, finance costs, sales and marketing costs, and contingency. Most lenders will expect the developer to have some equity in their deal ('skin in the game') but how much typically depends on the overall leverage and other funding layers such as mezzanine finance. Naturally, very high LTC projects may attract higher rates and, conversely, a project with strong developer equity may be offered better terms.
How do Development Finance Drawdowns Work?
A reliable and tightly-controlled build cost schedule is key to making development finance run smoothly. Lenders release funds in staged drawdowns once an independent monitoring surveyor (IMS) confirms works have been completed and the incurred costs align with the approved budget. A good working relationship with the IMS and contractor will help to keep the project running smoothly, and keep the lender comfortable.
Valuations are crucial, but lenders will also want to see:
A sensible cashflow curve, not a hopeful one. A good quantity surveyor and/or contractor can help to shape the how costs are likely to land over the life of the project.
Contingency that reflects reality, ideally with a costed-contingency tracker.
A professional team with capacity and relevant experience.
Many developers panic if materials inflation or programme slippage threatens cashflow, however an experienced development finance broker will be familiar at working through issues that arise, help to re-sequence, re-justify and work with the lender to keep the facility tracking, and help to maintain the course of the project.
Fees, Rates & Cashflow
Pricing reflects leverage, scheme risk, and your experience. Expect an arrangement fee, interest (often rolled up during construction), an exit fee in some structures, a broker fee, and professional costs (valuation, IMS, legal). We’ll help you to model total finance cost and its impact on profit on cost and profit on GDV. This moving parts can all influence your profit margin, IRR or ROCE.
Clients find our development finance calculator extremely helpful in modelling their development viability.
Build Costs
We often describe the cost plan as the project’s DNA. It needs enough detail to show the lender exactly how the scheme will be delivered, but without noise and distractions. Just clarity, logic, and believable numbers are the key here.
A solid schedule will typically break down labour, materials, prelims, and professional fees clearly, as well as showing how contingency fits in. It reflects current pricing conditions, not last year’s, and demonstrates that the contractor, QS, and developer are aligned on the programme and the cashflow curve.
When the cost plan is robust, lenders have more comfort that the developer has a good handle on things. Without a robust cost plan, lenders ask questions — lots of them!
Build Costs Checklist
Make sure your build cost schedule includes (but isn't limited to) the following:
A full breakdown of labour, materials, and prelims.
Professional fees (architect, structural engineer, M&E, QS, building control) ideally broken down.
A realistic, costed, contingency allowance that matches scheme complexity.
Evidence of current unit sales pricing, not outdated values.
A programme‑linked cashflow so costs map logically to drawdowns.
Confirmation of contractor quotes, Bill of Quantities (BOQs), or tender pack support.
Allowances for statutory fees and service connections.
Clarity around fixtures, fittings, landscaping, externals, and any “nice to have” or upgrade specs.
Breakdown of sales and marketing costs
If sales are likely to go beyond the construction period, an allowance for void costs of stock units (utilities, maintenance, council tax, service charges).
A clear note on VAT treatment, if applicable.
Development Finance and Planning Permission
With full planning permission, you’ll typically get stronger finance leverage and lower pricing from lenders, as their risk is reduced. You may even get accelerated drawdowns. If the site will have detailed planning permission at loan completion and you intend to build, development finance is the way to go.
If, however, you’re buying a site subject to planning or you’ve only got outline planning, it's still possible to finance these projects. If the site won't have detailed planning permission at loan completion, we can structure a planning bridge loan, then refinance to development finance once planning has been secured. This is often referred to as 'bridge-to-development'.
Lender Criteria: What Do Property Development Funders Look For?
We've discussed the finance side of development funding including developer equity, LTC and gearing against GDV which are, of course, crucial to the deal structure. However the figures are only one side of the coin. Without the right experience, evidence and governance, even a project with the best looking numbers may struggle to secure the best finance.
Apart from the figures, lenders will typically look for three key things in any new development project:
They want experience in the project and a developer track record that matches the complexity of the scheme. For first-time or less established developers this might mean appointing a contractor with some pedigree, and an experienced professional team (for example an Employers Agent and Quantity Surveyor).
They want project viability, supported by robust comparables and realistic sales rates. There is no room for dreaming when it comes to exit strategy. If the market is price sensitive or over saturated, showing a possible 'plan B' strategy (for example flipping tenure to PRS/Build-to-Rent, or Affordable Housing) may also help.
They want project governance. This means a robust build contract with teeth, sensible prelims, clear Employer's Requirements (ER's), evidence of insurances, build warranties, CDM compliance, costed contingencies, and a programme that assumes the British weather. Fixed-price JCT building contract routes also tend to reduce lender anxiety.
Exit Strategy: The Key Piece
Arguably the most important part of ground‑up residential development finance isn’t the interest rate - it’s the exit strategy. Whether the intention is traditional sales to owner‑occupiers, a block sale to an institutional investment buyer, or a refinance to Build‑to‑Rent hold with a term facility. We help you map your exit strategy and costs and compile the evidence you need to support it.
We always start with the end in mind, which means aligning your PC date, sales absorption rate, and facility maturity so you aren’t sprinting the last 100 metres uphill.
Where sales might be seasonal, or local demand is absorption‑sensitive, and sales are slow, a development exit finance facility can lower your cost of capital post‑practical completion, potentially release capital, remove the need for contractor retention within your development facility, and buy time for marketing the remaining units. Speak to us about development exit loan refinancing to release capital and buy time for sales.
Our Free Development Consultancy Service
With an extensive track-record in development and new homes, we provide ongoing free consultancy service to our developer clients to support throughout a project.
We can help with areas such as reviewing your feasibility, sales values and exit position, interrogate the cost plan, sense check the programme. We can help you optimise your project and profit margins, and avoid common pitfalls.
Ground-Up New Build Development Finance FAQs
Ground-up development loans are usually structured around a combination of an initial land advance and staged drawdowns to fund construction. The lender releases funds in arrears against certified progress, typically monitored by an independent surveyor. Interest is often rolled or retained, and the facility is designed around a clearly defined exit, usually sale or refinance.
Most lenders will advance up to 70–75% of total project costs (loan to cost) and up to around 60–65% of gross development value (GDV). The exact leverage depends on scheme size, borrower experience, location, and strength of exit. Higher leverage is sometimes possible with additional security or equity support.
Full planning consent is typically required before a lender will issue formal terms. Some lenders will consider sites with outline permission or resolution to grant, but this tends to be more specialist and lower leverage. Projects without planning are usually funded via bridging or land finance rather than development finance.
Lenders assess both the borrower and the professional team. Proven experience delivering similar schemes is a key factor, particularly for higher leverage or larger projects. Less experienced developers can still access funding by working with an experienced contractor, strong consultants, or by injecting more equity.
After the initial land purchase, funds are released in stages against build progress. A monitoring surveyor inspects the site and signs off each stage before funds are drawn. This ensures the lender’s exposure tracks the actual value created on site and keeps the project aligned with the agreed cost plan.
Development finance can cover land purchase, build costs, professional fees, and contingency. Certain costs, such as planning or early-stage design, are usually funded by the borrower prior to the loan. The exact scope varies by lender and deal structure.
A clearly defined and credible exit is essential. This is usually the sale of completed units or refinancing onto a term facility such as a buy-to-let or commercial mortgage. Lenders will assess local demand, pricing evidence, and sales rates or rental assumptions to ensure the exit is realistic.
Timescales typically range from 4 to 8 weeks, depending on complexity. Key stages include valuation, appraisal, quantity surveyor review, legal due diligence, and credit approval. Delays are usually linked to planning documentation, build cost clarity, or legal/title issues rather than lender appetite.
Summary & Next Steps
If you’re planning a new build scheme and want a broker who will own the process from term sheet to exit, we’d love to talk. Share your site, your numbers, and your goals with us and we’ll look across our broad network of specialist development lenders to find the right fit for you and your project.
Want to bridge into planning and then flip to ground‑up residential development finance? We’ll structure that pathway and manage the handover.
We can also place development exit loans to buy more time and allow you to maximise sales value and profit post‑PC.
Ready to get moving? Send us the essentials such as your site address, planning status, cost plan (if available), and we’ll come back with options and timelines.
