In this month’s feature we expand on the article recently published in Australian Property Investor Magazine title “Convincing your lender to say Yes” Our focus today is choosing the right lender.
It’s important to understand that various Bank and Lenders whilst all offering Development Finance do have in some cases vastly different lending policies. Banks for example will lend anywhere between 70% to 80% of the development cost of the project (and even the cost definition various from Bank to Bank) provided in most cases that does not exceed 65% of the projects end value.
The other vastly different adoption of lending policy is the level of pre-sales / debt coverage required. Finance Advocates Australia has arranged Bank loan funding where there has been no pre-sales however the majority of the Banks will generally require a minimum of 75% debt coverage with one major bank wanting 100% debt coverage net of agents commissions and GST.
Gross Realisation Lenders or End Value Funders take a totally different approach on the other hand. Whilst they still adopt funding on a cost to complete basis like the banks, the development loan amount is generally based on the end value of the project net of GST (in most instances its 66% on a First Mortgage Basis). This sees the borrower being able to borrow more money than a cost based funding option like the banks. Pre-Sale levels are much more flexible as well with several offering no-presales required up to certain borrowing amount generally $5m.
Using an experienced development finance partner such as Finance Advocates Australia which has funded over $1b in development deals in its 30 years’ experience, can help identify the most appropriate development loan lender for your next project and ensure the lender say “Yes” to your development finance request.
