Development finance calculator

How is development finance calculated?

Development finance is a short-term facility that funds the construction of a property scheme and is repaid when the scheme sells or refinances. A lender sizes it on the lower of two ratios. Loan to cost is the facility measured against the total development cost, the land plus the build cost plus the professional fees, indicatively up to around 65 percent. Loan to GDV is the facility measured against the gross development value, the value of the finished scheme, indicatively up to around 70 to 75 percent. The lender advances whichever figure is lower, which is why this calculator works out both and shows you the one that binds.

Build to rent development finance is a type of residential development finance, sized the same way, but underwritten on the stabilised net operating income and the rental yield the finished homes will produce rather than on unit sales. The same loan to cost and loan to GDV test applies, and the exit is a refinance onto investment debt or a sale to an institutional investor rather than open-market sales.

What the results mean for your equity and profit

The maximum facility is the senior debt a lender will advance. The equity required is what you fund yourself: the total development cost plus the finance costs, less the facility. On a scheme at 65 percent loan to cost, that is usually around 35 percent of cost as equity, before mezzanine or equity is brought in to stretch the position. The profit is the gross development value less the total cost and the finance, and the profit on cost is that profit as a percentage of the total cost including finance. Lenders generally want a profit on cost of around 15 to 20 percent as the cushion that protects the loan if costs run over or the market softens.

Where the senior facility leaves a larger equity cheque than you want to write, mezzanine finance or equity can lift total leverage toward 80 to 90 percent of cost at a higher coupon. The development exit, once the scheme reaches practical completion, is usually a refinance onto cheaper investment or term debt while the homes let up, which our development exit finance page covers.

Development finance costs, fees and interest rates

The total cost of a development facility is the interest plus the fees. Interest rates on senior residential development finance are indicatively around 7 to 10 percent a year, usually quoted as a margin over SONIA, and the interest is normally rolled into the facility rather than serviced monthly, because the scheme is not producing income during the build. On top of the interest sit an arrangement fee, usually around 2 percent of the loan amount, an exit fee on some products, a monitoring surveyor fee, and the valuation and legal costs. The calculator estimates the arrangement fee and the rolled interest so the all-in cost of finance is clear before you commit. The build costs, the land and the loan amount all feed the loan to cost, so a tighter build budget improves the leverage the calculator returns.

Which lenders provide development finance

Development finance lenders are a specialist market: development banks, challenger banks, debt funds and private lenders that underwrite a scheme on the appraisal rather than an income. Each prices differently on leverage, on the developer's track record and on the asset, which is why the rate and the loan to cost are not a single number. We are an arranger and introducer across the development finance lenders and institutional funders that back residential and build to rent schemes, so we run the case across the market rather than approaching one bank. The yield the finished homes attract drives the gross development value: Knight Frank put prime Tier 1 regional city multifamily net initial yields at around 4.50 percent in September 2025, with Greater London at around 4.25 percent, so a keener yield supports a higher GDV on the same rent. Savills recorded a record 5.3 billion pounds of UK build to rent investment in 2025, the institutional demand that underpins the refinance and sale exits a development facility is repaid from.