Use Development Finance to Refurbish a Property

Development finance is a type of short-term lending that a property developer or company will use to pay for the renovation or refurbishment of a property.

Whether it is a new build or existing property, we can contribute towards the two main aspects: (1) construction costs and (2) purchasing the property.

With Octagon Capital, customers can borrow amounts starting from £50,000 up to £25 million for a loan term of 6 to 24 months depending on the size and scale of the project.

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Apply For Property Development Finance

Octagon Capital are a regulated broker and work with a number of leading development finance lenders such as Magnet Capital and providers to help find the right finance and terms for you. Simply call us on the number provided or enter your details below and your enquiry will be sent to our dedicated development finance team who will get in touch immediately.

Once you have spoken to our advisors and we have a better idea of your plans for development, we are able to give an approval in principle in as little as 24 hours. We are able to facilitate funding for the following types of development:

  • New builds
  • Renovations
  • Extensions and conversions
  • Part builds
  • Residential property (see below)
  • Commercial property (see below)

Residential Property Development Finance


From single residential builds to large-scale multi-unit development complexes, we can help you renovate, refurbish or buy properties for residential purposes. Whether it is a single flat, house, mansion or block of flats, Octagon Capital can help you finance the construction costs and purchase the property on flexible terms. Once complete, you as the developer will have the choice to sell the new and improved flats or homes at a higher price or rent them out to the public and generate some rental income.

Commercial Property Development Finance

Commercial development finance

If you are looking to finance commercial properties including offices, shops, farms or vacant land, get in touch with one of our advisors today. We can help you finance all the fittings and fixtures such as lighting, plumbing and the aesthetics of the store front. We work with a range of lenders who are experienced in working with commercial property so you can be rest assured that you are in good hands.

New Build Finance

Whether you are building a new estate from a plot of land or knocking down a property and starting from fresh, we can help find the new build finance for you. There are several new build schemes provided by local councils and banks to help those with new builds, including those with deposits of just 5% (help to buy), equity loans where you can get five years interest free if you have a 20% deposit and also guarantor mortgages. (Source: MoneyAdviceService)

A developer has planning permission to build three houses with the gross development value estimated at £5 million. The total costs involved are £3 million, made up of £1.5 million for purchasing the land and £1.5 million in build costs. A lender might agree to development finance of £3.75 million (limited to 75% of costs) structured as £400,000 initial advance followed by the balance in stages throughout the build.

How Much Can You Borrow With Property Development Finance?

Whilst it varies from lender to lender featured on Octagon Capital, the loan amount is based on a percentage of gross development value (GDV) and what the property will be worth at the end of the work you have done as it were sold to a purchaser on the open market. Some of the lenders we feature offer a maximum of 60% loan to GDV, with a maximum of 75% of total costs. Typically, the development finance lender can provide all of the build costs and just a percentage of the land costs. The money is usually sent to the developer in stages according to the certifications from the architect and quantity surveyor and therefore funds are not usually sent in one lump sum for this kind of finance.

What Costs and Payments Are Involved?

You are not required to pay anything until a formal offer letter is issued. Upon accepting the offer, there is a ‘commitment fee’ of around 2% of the total amount borrowed and there could be a broker fee of 2% applicable too. There also fees charged by your own surveyor and solicitor in order to value the properties in question and handle any contractual and legal administration.

In terms of interest charged, lenders start at 6.0% per annum which can vary depending on the company, GDV, security and more. When it comes to repaying your loan and interest, you can choose to do this on a monthly basis or ‘roll up’ the interest so that you can delay full repayment once the project is completed and sold. This will mean that the interest is compounded so will be slightly more expensive compared to paying each month.

What is The Difference Between Bridging and Development Finance?

As you may have noticed, the Octagon Capital website is largely dedicated to bridging loans and the overlap between the two products is a regularly debated. A bridging product is focused more on borrowing money to close out a deal with a strict deadline.

The perfect example of this is when buying a property from an auction and need to come up with the money within 28 days or you risk losing it. Property development finance is best used to refurbishments and renovations and is not necessary as time sensitive, despite both loans having a maximum term of 24 months. Another key differentiation is basing the project on how ‘heavy’ it is, with different categories below associated with property development and not bridging.

Light Refurbishment

The main changes to the property are aesthetic rather than structural, and involve internal work on floors, ceilings and walls. This is generally the most straightforward type of development.

Heavy Refurbishment or Renovation

As well as aesthetic changes, this could require moving internal walls, plumbing, or electrics, adding rooms and external walls, or even partial demolition and rebuilding.

Ground-up Development

Starting from an empty piece of land and building it up. The heaviest type of property project, starting with an empty plot of land (or just stonework), or a very heavy refurbishment/conversion and turning it into fully functioning homes or block of flats with the aim to rent it out to the public or sell on the open market.