Residential Development Loans

Whether you are looking to subdivide and build on your existing title (such as a traditional battle-axe subdivision), or if you are looking to buy vacant land and build multiple dwellings, you will likely need a residential property development loan to fund your project.

For developments of up to four units, including duplexes, triplexes and townhouses, funding is available as a residential property development loans.  For larger projects you will need a commercial property development loan. 

Much like a residential construction loan for a single dwelling, residential property development loans are generally paid as progress instalments to the builder as the development reaches each stage of the build. These stages and amounts are generally agreed in a fixed price building contract. Common stages may include:

• Deposit
• Base/slab
• Frame
• Lock-up
• Fixing

Any residual amount is generally released at the END of the build. If you require funds to complete elements of the build included in the loan amount prior to the build completion (for example fencing or landscaping) it is important to structure your lending from the start to allow this flexibility.

Key loan terms such as the loan to value ratio (LVR), interest rate and what you can use the funds for may differ to a standard residential loan. Some examples of difference are provided below; however, it is dependent on the development and lender. Skate Capital will work to match your development funding needs with the right lender to maximise your development.

• Your maximum LVR will depend on the size of your development and the lender. Two-dwelling developments are generally available up to 80% LVR, with larger developments reducing to a 70% LVR. 
• Interest rates can be 1-2% higher compared to a standard residential investment loan.
• Restrictions may apply on what the loan will cover - some lenders do not cover costs such as legal, architect and development application fees.
• Some lenders require the borrower to have a contingency for project delays or any shortfall to complete the project. This is a common requirement for owner builders.

Most lenders will need additional information relating to your development on top of normal lending application information such as details relating to your income and expenditure. Commonly, a development business plan would include:

• Details of how much you are contributing to the project and where those funds will come from
• Contingency funds to cover costs if unexpected expenses arise
• Your development experience on similar projects
• Your builder’s experience and qualifications
• A description of the property, including where it is located and its zoning
• A design concept for the project
• A timeline for construction
• The total projected cost of the project
• What you plan to do with the properties once built - for example, sell, rent or a mix of both.