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.
Typical Development Finance Structures
Most lenders will blend two components. There’s often a site acquisition loan combined with a build facility. The acquisition tranche may land on day one; the build facility is drawn in stages as works complete and are verified by a monitoring surveyor.
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
Senior debt is the foundation of most ground‑up residential development finance deals. It’s the main loan secured in first charge position and usually the cheapest form of development funding because the lender carries the least risk. In simple terms, senior debt does the heavy lifting—covering the site acquisition and the majority of the build costs.
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 debt is like senior debt, but with more leverage. The same lender agrees to push further up the gearing scale, offering higher leverage than standard senior debt so that the developer doesn’t need to layer in additional funders.
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 finance sits behind senior debt and fills the gap where the developer can’t (or doesn’t want to) commit more equity. It’s essentially a second charge loan with a different lender that increases the total leverage available on the project.
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‑Value (LTV) looks at the day‑one loan against the current site value. It’s relevant for acquisitions, especially where planning is secured. Some lenders cap day‑one LTV tightly, whereas others allow headroom if your track record and planning position are strong. An experienced professional team can add real value in these situations, for example where a reliable and thorough planning consultant report is available.
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.
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.
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:
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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.
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Contingency that reflects reality, ideally with a costed-contingency tracker.
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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.
Before any lender talks about drawdowns, they look closely at the build cost schedule itself. A good cost plan is the backbone of any ground‑up residential development finance facility. If the numbers are vague, incomplete, or overly optimistic, lenders can tighten leverage very quickly, or not offer terms at all. But when the schedule is well-built, realistic, and professionally evidenced, everything downstream (valuations, monitoring, and drawdowns) becomes far smoother.
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!
Make sure your build cost schedule includes (but isn't limited to) the following:
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A full breakdown of labour, materials, and prelims.
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Professional fees (architect, structural engineer, M&E, QS, building control) ideally broken down.
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A realistic, costed, contingency allowance that matches scheme complexity.
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Evidence of current unit sales pricing, not outdated values.
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A programme‑linked cashflow so costs map logically to drawdowns.
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Confirmation of contractor quotes, Bill of Quantities (BOQs), or tender pack support.
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Allowances for statutory fees and service connections.
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Clarity around fixtures, fittings, landscaping, externals, and any “nice to have” or upgrade specs.
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Breakdown of sales and marketing costs
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If sales are likely to go beyond the construction period, an allowance for void costs of stock units (utilities, maintenance, council tax, service charges).
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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:
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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).
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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.
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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.
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.
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 residential development finance isn’t a commodity to us. It’s a craft. As a property development finance broker, we’re relentless on detail, pragmatic in negotiations, and human when pressure builds. We know when and where we can help you to push, and when things need a re-think. We provide ongoing coordination between our clients and the lender, and help to resolve any issues and keep things moving. Above all, we care about your outcome - homes homes built, profit protected, and time respected.
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.