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OMB guide 6 of 16 · 2027 edition

Development Finance in 2027

Funding new builds, conversions and major renovations: leverage, costs and how lenders assess a scheme.

Written by the OMB team · reviewed by Akhil Mair, Managing Director, CeMAPUpdated October 2026How we write and check our content

In this guide
  • How development finance is structured and drawn down
  • Leverage, costs and lender appetite
  • A fictional, illustrative case study
Get all 16 guides as PDFsDevelopment finance

Funding a development project

Development finance funds construction, conversion or major renovation, released in stages as the work progresses rather than as one lump sum. It is a specialist market served by banks, building societies and a large number of non-bank lenders, each with different appetite for scheme size, location and experience.

60–70%Typical senior debt leverage, as a share of gross development value
1–2%Typical arrangement fee, plus monitoring surveyor costs
3.75%Bank Rate, September 2026: development loans are priced at a margin above it

How it is structured

  1. Define the project. Residential, commercial or mixed use, with clear scope, size and location.
  2. Build a detailed appraisal. Costs, programme, sales values and profit: this is what the lender underwrites.
  3. Agree leverage. Senior debt usually covers 60–70% of gross development value. Mezzanine or equity finance can top this up, at higher cost.
  4. Draw down in stages. Funds are released against verified progress, checked by the lender's monitoring surveyor.
  5. Exit. Sell the completed units, or refinance onto a term or development exit loan if you are holding them.

Where Lender Appetite Is Strongest

Residential-led schemes in established locations attract the most competitive terms, along with build-to-rent and well-located conversions. Lenders look closely at the developer's track record, the main contractor, planning status and pre-sales. Development exit loans, which refinance completed but unsold units, help developers avoid selling at a discount while sales complete.

Costs to budget for

Beyond the interest rate, budget for arrangement and exit fees, the lender's valuation and monitoring surveyor, legal costs and a contingency of at least 10% of build costs. These vary between lenders and make a real difference to profit, so compare the total cost of each facility.

Regulation

Development finance for business purposes is not regulated by the Financial Conduct Authority. Take independent legal and tax advice on your project structure.

Illustrative example · not a real client

An office block becomes eleven flats: a fictional case study

A developer identified a half-empty office building in Leeds suitable for conversion to flats. With a detailed appraisal and cost plan, their broker arranged senior debt at 65% of gross development value and a mezzanine facility for the balance, released in four stages. The flats sold within five months of completion and the facilities were repaid in full.

Names, figures and circumstances are fictional and illustrative only. They do not represent an actual client of Our Mortgage Broker Limited.

Planning a development project?

Speak to a CeMAP-qualified OMB adviser: whole-of-market advice, with any fee confirmed in writing before you proceed. Read more about development finance.

Start your enquiry 0203 971 1234

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Your home may be repossessed if you do not keep up repayments on your mortgage. Most buy-to-let and commercial mortgages are not regulated by the Financial Conduct Authority. Our Mortgage Broker Limited is authorised and regulated by the Financial Conduct Authority (FRN 944663). Registered in England and Wales, company no. 11358646. Registered office: 23 Berkeley Square, Mayfair, London W1J 6HE. There may be a fee for mortgage advice: we may charge up to 1% of the loan amount, and our typical fee is £500. Your fee agreement sets out the exact fee and when it is payable (at decision in principle, application or mortgage offer); fees are not refundable once due. We usually also receive commission from the lender. This guide is general information only and is not personal advice. Case studies are fictional, illustrative examples and do not represent real clients. Rates, tax and regulatory information are correct as at October 2026 and may change, including at the Autumn Budget on 28 October 2026.