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What Can Be Done With A Development Loan?

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Property development loans are generally used to finance the construction of properties on the same development lot. However, if you are thinking about applying for a development loan, you might be wondering what exactly can be done with one if you are approved. Development loans can be used to fund developments such as residential units, apartments, and commercial spaces, depending on the type of development loan that you have applied and been approved for.

If you’re looking to find out all about development loans and what they can be used for, read on below.

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 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

What can be done with a development loan?

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A development loan is intended to help you build development from the ground up. Development loans generally cover the cost of the construction process, although the size of the loan generally depends on the type of property and the size of the development.

Generally, most lenders split property development into two categories:

  • 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 type of development loan that you apply for will generally decide what you can do with it, and how many units can be built.

How does funding work?

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Funds for a development loan generally work a little differently to those of a standard loan. Generally, the funds for a standard loan are released at once. However, 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. Generally, there are five stages of a development loan:  

  • 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.  Your lender will be able to explain how much of your development loan will be released at each of these stages, as well as what you will need to provide them with to progress to the next stage of development.

Development loan or construction loan?

If you’re looking for a development loan, you might notice a few similarities with construction loans. A construction loan should be used if you’re building a house, either to live in or as an investment property.

Similarly, construction loans usually have payments that are staggered, based on the stages of construction. A lender will release funds to your builder only when those stages have been met, rather than all of it in one lump sum. Once construction has finished, the construction loan will become a typical mortgage.

In the case of development loans, they are designed to fund the construction of multiple properties under the same title. Construction loans are for a single residential property under one title.

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 one of our loan specialists for your free initial consultation today!

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