Estimate Your Development Loan, Interest and Profit Before You Speak to a Lender
A development loan is sized very differently from a mortgage. The lender starts with the cost of the build, sets that against what the finished units should sell for, then allows for the interest that will build up over the months on site. This calculator brings all of that into one view. You get a working estimate of the facility, the cash you will need to put in yourself, and the profit left over after finance.
Put in your land price, build budget and gross development value (GDV). From there you can move the rate and term around until they reflect the deal in front of you, and the results change as you type.
Results are indicative only. They are based on typical UK development finance terms in 2026 and are not an offer of finance.
How to Use the Development Finance Calculator
Every box in the calculator lines up with a figure a lender will want at heads of terms. Feed it numbers from a proper appraisal and the output will be far closer to what you are eventually offered.
Land or Purchase Price
Enter what you are paying for the site or building. Lenders rarely fund the whole purchase. A day-one advance of 50% to 65% is normal, measured against the purchase price or current value, whichever is lower, and you fund the gap.
Build Costs and Contingency
Your construction budget should come from a contractor quote or a quantity surveyor’s cost plan rather than a rough per-square-foot guess. On top of that, lenders want a contingency, usually 5% to 10% of build costs, and most are willing to fund it. Leave it out and your figures will look healthier than any credit committee will accept.
Professional and Other Costs
This covers planning, architects, structural engineers, warranties, building control and legal fees. A minority of lenders fund some of these. Most leave them for the developer to pay.
Gross Development Value (GDV)
GDV is the open-market value of the completed scheme, whether you plan to sell units one by one or dispose of the block in one go. Base it on achieved sale prices nearby, never on asking prices. Bear in mind that the lender instructs its own valuer, and valuers tend to come in below the developer’s figure.
Interest Rate, Term and Fees
Development lenders quote a monthly rate, much as bridging lenders do. When choosing a term, allow for the full build programme and then add enough time to market the units or move onto longer-term funding. The arrangement fee is added to the loan at the start, while any exit fee falls due on redemption.
How Lenders Work Out the Size of a Development Loan
Lenders run two separate tests on every scheme, and the lower result becomes your maximum loan.
Loan to Cost (LTC)
LTC sets the lender’s money against total project costs, meaning land, build, contingency and professional fees combined. If you have completed schemes behind you, 85% to 90% LTC is usually achievable. On a first project, 80% to 85% is more realistic.
Loan to Gross Development Value (LTGDV)
LTGDV looks at the whole loan, with rolled-up interest and fees counted in, as a share of the end value. Most lenders will not go past 60% to 70% here. Because interest keeps piling onto the balance until units are sold, this is normally where a deal gets squeezed.
So a scheme can look fine against cost and still come up short. Where margins are tight, LTGDV is the limit that bites, and lenders usually respond by trimming the day-one land advance. Example 2 below walks through exactly that.
Worked Examples
In both cases we have assumed the build budget is drawn in equal monthly tranches, with interest rolling up only on money already drawn. A lender’s own appraisal will land slightly differently, but not by much.
Example 1: Ground-Up Residential Scheme, Experienced Developer
An established developer pays £600,000 for a site with consent for six houses. The build is priced at £900,000. Allow £90,000 for a 10% contingency and £60,000 for professional fees, and the project costs £1,650,000 in total. Local sold prices support a GDV of £2,400,000.
On day one the lender releases 60% of the land price, which is £360,000. It then funds the full £990,000 of build and contingency in stages. That makes a net facility of £1,350,000, or 81.8% LTC. With a 14-month build and four months allowed for sales at 0.85% per month, roughly £147,645 of interest rolls up. Add a 2% arrangement fee of £27,000 and the gross loan reaches about £1,524,645. Against GDV that is 63.5%, well within a 65% cap.
Our developer contributes £300,000 in cash. Once interest, the arrangement fee, a 1% exit fee of £13,500 and roughly £48,000 of agents’ and legal fees on the sales are deducted, the scheme should make about £513,855. At 21.4% on GDV, most development lenders would be comfortable with that.
Example 2: Conversion Project, First-Time Developer
Someone new to development buys a former commercial building for £450,000, planning to turn it into flats. They budget £350,000 for the conversion, £35,000 for contingency and £40,000 for professional fees, giving total costs of £875,000. GDV comes in at £1,150,000.
On a quick look, everything seems fine. A 60% land advance of £270,000, plus £385,000 for build and contingency, comes to £655,000, comfortably under 75% LTC. Run the interest, though, at 1.0% per month across a 10-month build and four months of sales, and you add around £72,450. With the 2% arrangement fee on top, the gross loan rises to roughly £740,550, or 64.4% of GDV. This lender caps first-time developers at 60%.
To get under the cap, the gross loan needs to fall to £690,000. The lender achieves this by reducing the land advance to around £226,000, roughly 50% of the purchase price. Instead of £220,000, the developer now has to find about £264,000. More worrying is the margin. Even before that cut, profit sits at around 14% on GDV, short of what plenty of lenders will fund. A lower purchase price or a cheaper specification would help this deal more than shopping it around.
Typical Development Finance Terms in 2026
These ranges reflect the wider UK market. A developer with a strong exit on a well-located residential scheme will sit towards the better end, while a first project or an unusual site will usually be priced higher.
| Term | Typical Range |
|---|---|
| Interest rate (experienced developer, residential) | 0.65% to 0.90% per month |
| Interest rate (first-time or higher-risk schemes) | 0.90% to 1.30% per month or more |
| Loan to cost | 80% to 90% |
| Loan to GDV | 60% to 70% |
| Day-one land advance | 50% to 65% of purchase price or value |
| Arrangement fee | 1% to 2% of the facility |
| Exit fee | 0% to 1.5%, where charged |
| Monitoring surveyor | £500 to £1,500 per visit |
| Facility term | 12 to 24 months, longer for larger schemes |
| Development exit finance | 0.60% to 0.90% per month |
Costs the Headline Rate Does Not Show
We regularly speak to developers who chose a lender purely on rate and regretted it. Two offers at an identical monthly rate can differ by thousands of pounds once everything is counted.
You only pay interest on what you have drawn, but it is usually added to the loan every month. That means the debt climbs fastest in the final stretch of the build, when most of the money is out. Overrunning by three or four months near completion is far more expensive than slipping by the same amount at the start.
Watch how the exit fee is worked out. One lender may charge on the gross loan, another on GDV, and on a bigger scheme that gap can run to a sizeable sum. Before each drawdown a monitoring surveyor visits site, and every visit is charged to you. Valuation fees, and legal costs on both sides, are normally payable even if the loan never completes.
What the Calculator Cannot Tell You
The calculator only knows the figures you type in. A credit team is assessing you as a developer and the plan you have put together.
Experience counts for a great deal. First schemes do get funded, just at lower leverage, with more site visits and harder questions about your architect, contractor and project manager. Lenders also look closely at consent. Most will not commit until full planning is granted, and on permitted development projects the prior approval needs to be properly in place.
Then there is repayment. Every lender will ask how the loan gets cleared, whether that is through selling the units, refinancing onto a longer-term loan or switching to development exit finance at practical completion. A shaky exit strategy tends to sink an application however good the rest of it looks.
Frequently Asked Questions
How much can I borrow with development finance?
Most lenders will lend up to 85% to 90% of total project costs, as long as the full loan stays within 60% to 70% of GDV. Because rolled-up interest and fees count towards that second figure, GDV is usually what sets your maximum.
What is the difference between LTC and LTGDV?
LTC compares the loan with what the project costs, whereas LTGDV compares it with the completed value. A lender works out both and offers the smaller amount.
How is interest charged on a development loan?
You pay interest on drawn funds only, not on the full facility from the first day. It is normally rolled up into the loan and cleared from sales or refinance proceeds, so there are no monthly payments while you build.
Can a first-time developer get development finance?
Yes, though the terms are usually tighter than for experienced developers. Lower LTC and LTGDV limits are common, the rate is often slightly higher, and the lender will want a capable professional team and contractor on board.
What profit margin do development lenders look for?
Most lenders want to see a profit of at least 20% on GDV, or around 25% on cost, after finance and sales costs. A thinner margin is not always fatal, but expect lower leverage or a request for more equity.
How accurate is this development finance calculator?
It is a good guide for early planning, not a formal quote. Build costs are assumed to be drawn evenly and interest is not compounded, so a lender’s figures may come out a little higher. Valuation, planning and your track record will shape the final offer too.
Speak to a Development Finance Specialist
Commercial Finance Network is a whole-of-market FCA authorised broker working with property investors, developers, and businesses across the UK and internationally. We work across the full specialist development finance panel and will tell you which lenders will engage with your scheme, what leverage and rate to expect, and how to structure the application before anything is submitted.
Call us on +44 1494 622 111 or email info@cfnuk.com to speak to a specialist directly.
Development finance is a form of business-purpose lending and is not regulated by the Financial Conduct Authority in the way a residential mortgage is. Your property may be repossessed if you do not keep up repayments on a loan secured against it.
Related Pages
- Refurbishment Loan – Shorter-term funding for light or heavy refurbishment where a full development facility is more than the project needs.
- Mezzanine Finance – Top-up funding that sits behind senior development debt when the LTC limit leaves a gap in your budget.
- Bridging Loan Calculator – Estimate the cost of short-term finance for site purchases, auction buys or light refurbishment.
- Commercial Mortgage Calculator – Work out repayments on a term loan once a completed commercial or mixed-use scheme is ready to refinance.