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What are the stages of a development loan?

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If you’re looking for a development loan, look no further. The many stages of development loans can be confusing, as generally different funds are released at different stages. However, this is done to make things run smoothly in the long run. Funds are released at the end of each stage to ensure that each stage of the development is progressing correctly, and to ensure that there are enough funds to continue to the next stage.

Read on below to find out the different stages of a development loan.

What is a development loan?

A property development loan is designed to fund the construction of multiple properties under the same title. For developments of up to four units, funding falls under a residential property loan. For any larger development, a commercial property loan is needed.

When looking at property development loans, it is important to understand the two different types. Knowing which loan is right for your development will save you both money and time spent lodging documents, and get you on your way to building much faster.

Most lenders split property development into two parts:

  • Residential- Most lenders define residential property development as a small scale development of up to four units.
  • Commercial- If your property development is greater than four residential units, lenders are likely to class it as commercial property development. This can range from a series of commercial properties to an apartment complex. 

The stages of a development loan

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Funds for residential property loans are generally released at the end of each building stage instead of in one lump sum. This is to ensure that you are continually able to pay your builder throughout the construction process. Because your loan will be paid out in stages, it’s important to be aware of what those stages are.

  • The deposit
  • Base stage
  • Frame stage
  • Lock-up stage
  • Fixing stage

It’s at the end of each of these five stages that your funds will be released for you to pay your builder and tradespeople, as well as to make sure that your build is progressing correctly. 

What do you need to apply for a development loan?

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One of the main things to consider when obtaining a development loan is whether you will need a residential or commercial development loan. The way that the funding is arranged depends on the number of properties being built on the development site. Some lenders tend to have a tougher approach to development loans, meaning that you’ll need to provide a range of personal details and extra documentation in addition to the lending standard criteria.

Along with the usual forms of identification, you will need to provide your financial details. Documents such as bank statements, cash flow projections and details of your assets and liabilities may be needed. Your lender may ask for details of the property you want to purchase, such as its location, as well as a professional valuation to determine how much the property is worth. However, different lenders may require different documentation.

Depending on your lender, they may ask for a wide range of other details. It’s important to check with your lender during the application process so you are aware of what they will require from you, and when.  

Where does Tiger Finance come in?

With Tiger Finance, we can help to get you a loan in four easy steps. You will have a free consultation with one of our specialists, and we will tailor-make you a loan. We will negotiate with lenders on your behalf before you are approved.

We have helped countless Australians with both good and bad credit ratings to be funded for their dream development. We understand that lending criteria from other lenders are too strict and can stop you from achieving your goals.

How we can help

Our finance specialists can help you find the right development loan for your project. Development loans are a complicated topic, but we will find a loan that makes your dream project that much easier.

If you are one of the many Australians finding getting a development loan difficult, Tiger Finance can make the process simple and pain-free. Call our specialist team for your free initial consultation today!

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