Development exit: cheaper money once the building is up.
Practical completion is reached, the units are not all sold, and the development facility is about to expire or is costing too much. A development exit bridge repays it, releases equity, and gives you time to sell at the right price.
Why developers use it
- To stop the clock on an expensive facility. Development finance is priced for risk during construction. Once the building is complete, that risk is gone and the price should fall. Exit bridges are typically 0.55% to 0.85% per month, often cheaper than the facility they replace.
- To release equity. Most exit lenders will lend up to 70% to 75% of the open-market value of the completed units, which is usually more than the outstanding development loan. The difference is cash you can put into the next site.
- To avoid a fire sale. With a 12-month exit bridge you can sell in an orderly way rather than discount to hit a lender's deadline.
- To let and hold. Some developers use the exit bridge to let the units, then refinance on to a portfolio or multi-unit BTL mortgage at investment value.
Typical terms
Loans from £500,000 to £25m+, up to 75% of the aggregate value of the unsold units, 6 to 24 months, interest retained or serviced from sales. Lenders generally allow individual unit sales with a release price per unit (say 90% to 100% of the net proceeds until the loan is below an agreed level). Rate from around 0.55% per month for a clean scheme in the South East with strong comparables.
What lenders need
- Practical completion certificate, or a clear date within a few weeks. Some lenders will refinance at wind-and-watertight with a small works retention.
- Building regulations completion, warranties (NHBC, LABC, Premier, or similar) and any planning conditions discharged.
- A schedule of units with values, and evidence: sales agreed, reservations, agent's opinion, comparable sales.
- A sales strategy and timescale. "Six units at £450,000, two under offer, agent expects the rest within nine months" is what they want to read.
- The redemption figure from the current lender.
Where it goes wrong
Leaving it too late. If the development loan expires and the lender appoints receivers, your options collapse. Start the exit facility two to three months before the development loan ends. The other trap is snagging: valuers will not sign off units that are visibly unfinished, so finish the show unit and the common parts first.
About the numbers on this page. Rates, fees and loan-to-values are typical market ranges for unregulated bridging in England, given so you can size a deal. They are not an offer. Your terms depend on the property, the exit, the lender and you.
Questions we get asked
Can I take money out for the next project?
Usually. If the unsold units are worth more than the outstanding development loan, an exit bridge at up to 75% of value can release the difference. Lenders will want to see the sales strategy is still credible after the equity release.
Do I have to sell everything within the term?
No, but the plan needs to show the loan being repaid: sales, or a refinance of any retained units on to term mortgages. Most lenders are relaxed about a mix.
What if the scheme is not quite finished?
Some lenders will complete at wind-and-watertight or with minor snagging outstanding, holding back a retention for the works. It is priced a little higher. Better to finish if you can; a signed-off scheme gets the best terms.
Can I service the interest from sales?
Yes. A common structure is retained interest for the first few months and then interest paid from each sale, with a release price per unit set by the lender.
Tell us the deal.
A few numbers and a postcode is enough for a first view. Indicative terms cost nothing and commit you to nothing.