A property development mortgage can be found a lot cheaper if you take it through a broker. A broker will have the knowledge of where to look to find you the cheapest rate of interest and best deal possible based on your specific circumstances. There are no fixed rates; a development mortgage is based on the circumstances of each individual. Factors that are taken into account when deciding the rate for your particular loan are the experience you have in property development and what you are intending to do with the loan.
Based on your circumstances you could expect to pay a rate of interest between 1.5 and 2.5 and of course the Bank of England base rate. A broker will always be able to match you with lenders who can offer the cheapest rates if you work with them. They are able to search the whole of the UK market place if this is necessary but usually through experience they will have an idea of which lenders can get you the best deal.
As for the majority of time a property development mortgage will be taken out for hundreds of thousands of pounds, the lender will offer the mortgage on an interest only basis. This means that you repay only the interest that accumulates on the amount you borrowed. However after the term has ended you then have to find the money to repay the total capitol left. The advantage of the interest only mortgage is that the monthly repayments will be smaller than had you taken out a repayment mortgage. Should you choose to take a repayment mortgage then the advantage is that you will pay off a little of both the capitol borrowed and the interest that accumulates on it. When you have repaid the mortgage over the term then you will be left owing nothing. A mortgage can be taken out from 1 year to 30 plus years if the project is a considerable one.
The amount the majority of lenders will allow you to borrow is based on the loan to project costs; these take into account the gross property development values. In the majority of cases lenders will loan you around 70 to 75 of the building costs and purchase price. Those who are very experienced when it comes to property development could get a mortgage for 100 but the criteria for this are very strict.
A property development mortgage needs to be given some serious consideration. A specialist will be able to find you the best deal that comes with the cheapest rate based on your individual circumstances. However it is down to the individual to make sure they have read the terms and conditions. Hidden costs can be included in these and they can add quite a lot onto the cost of the mortgage. You can find information relating to property development and mortgages on a specialist website. You should use this information to learn all you can before signing on the bottom line and taking on what is a huge responsibility financially.
Author Resource:-
Sean Horton is a Director of Enhanced Wealth (http://www.enhancedwealth.co.uk), a whole of market mortgage broker and IFA specialising in mortgage advice and the associated areas of income protection, mortgage protection, mortgage life cover.
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