Loans for property development

Property development can be a highly profitable venture, but securing the right development finance is crucial to fund land acquisition, construction, and project completion. Whether you're developing townhouses, apartment complexes, commercial buildings, or mixed-use developments, choosing the right finance structure can impact your project's profitability and success.

What is Development Finance

Development finance is a short-term loan designed to fund property development projects, covering: ✔ Land acquisition costs ✔ Construction costs ✔ Council and approval fees ✔ Professional fees (architects, engineers, consultants, etc.) ✔ Marketing and sales costs for completed units Unlike traditional loans, development finance is structured in stages (drawdowns), where funds are released at key project milestones, ensuring cash flow is managed efficiently.

Types of Development Finance

Senior Debt (First Mortgage Finance)

- The primary loan secured against the property. - Covers up to 65-75% of Total Development Costs (TDC). - Repayments may be interest-only during the construction phase. - Typically provided by banks and major lenders.

Mezzanine Finance

- A secondary loan used to reduce the developer’s capital contribution. - Sits behind senior debt, increasing overall leverage. - Can extend funding to 85-90% of TDC. - Higher risk = higher interest rates.

Private & Non-Bank Development Finance

- Offers flexible lending criteria and higher LVRs. - Faster approvals compared to traditional banks. - Suitable for projects with unique structures or limited pre-sales. - Interest rates vary based on risk and lender type.

Joint Venture (JV) & Equity Finance

- Investors or equity partners provide capital in exchange for a share of project profits. - Reduces the need for traditional debt but requires profit-sharing agreements.

How Much Can You Borrow?

Lenders assess development finance based on:

Loan-to-Cost Ratio (LTC)

% of total development costs covered (typically 65-75%).

Loan-to-Gross Realisation Value (LVR or GRV)

% of completed project value that can be borrowed (typically 60-70%).

Pre-Sales & Pre-Leasing Requirements

Some lenders require a percentage of units pre-sold before releasing funds.

Developer Experience

More funding options for developers with a proven track record.

Stages of Development Finance

1. Land Acquisition Funding

Initial loan to purchase the development site.

2. Construction Finance

Released in progress payments (drawdowns) as construction milestones are completed.

3. Completion & Takeout Finance

Once the project is completed, the loan is repaid through unit sales or refinanced into a long-term investment loan.

Testimonial

What our customer says about us

Testimonial

What our customer says about us

I have been with Ivy for 10 years. Ivy always exceeds my expectation and makes me feel my needs are a priority. Her professionalism and knowledge are of an extremely high standard and the communication and efficiency throughout the whole process was above and beyond. More than happy with the service from Ivy and Smart Mortgage and would not hesitate to recommend their services to others.

Yin Zhu

Onsite Manager of Rosewood Heights

My family uses Smart Mortgage to assist with the purchase of our home, investment, properties and commercial lending. Ben Ou, the Manager Director and his team are very experience and have always made our loan processes easy. I would highly recommend Smart Mortgage to my friends and clients who require finance for their properties. I am confident that the Smart Mortgage’s team will look after the customer’s best interests.

Simon Au

RE/MAX Number 1 Sales Team

Having worked with Angela for over 10 years, she has always been very professional and always puts my needs and interests first. Her work ethic is excellent and I trust in her abilities to always provide me with honest advice to help me reach my financial goals. My husband and I have several home and commercial properties with Smart Mortgage and I would highly recommend them to anyone who is looking for a company who truly puts your interests first.

Anh Pham

Manager at Queensland Soy Factory

I have dealt with Smart Mortgage for many years. There have been a few properties I have bought and sold over this period. Angela Duong is the person I have dealt with for my home loans. I have known Angela for over 10 years and have always found her and the staff at Smart Mortgage to provide outstanding services. Buying and selling houses are some of the most stressful things a person can go through in life. Knowing that Smart Mortgage are very professional and committed to the complete process from start to finish is a great relief.

Anne Poulton

Property Buyer

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