The rates can vary depending on the lender and scheme which will have their own set criteria.
However, all lenders will be considering points such as the loan amount requested, site location, experience of the borrower and any past history of working on similar projects and the amount of loan to gross development value (LGDV) when deciding what rate to charge.
As a guide, loans that are below £500,000 usually pay a higher rate of interest due to the amount of work and management of such a project. Loans for this can start from 6.5% per annum.
A loan of over £500,000 to an experienced developer could be charged at between 4.5% and 9% per annum.
For very small or high risk loans, you could be charged around 10.2%-16.2% per annum.
What about the fees?
There are a variety of fees that may be payable as follows:
Arrangement Fee: this is a fee charged by the lender as a set-up fee for the loan. It is typically charged at about 1-2% of the loan.
Exit fee: A majority of lenders will charge this and is payable to the lender when repaying the loan. Again, this will be 1-2% of the loan amount or GDV. You must know upfront which one it will be charged against as you may find a significant difference between the two.
Valuation fees: There is no set valuation fee but understandably these will be higher for bigger developments. The lender will need to instruct a valuation of the development.
Other professional fees: You may need to pay other professionals such as architects, solicitors and quantity surveyors. You may also need to pay monitoring surveyors or project managers.
Broker fees: These are charged by brokers for finding you the best lender to match your requirements and managing your application up to completion on the best possible terms. Some borrowers will pay a fee of typically 1%. We charge no broker fees for standard cases.