Your development loan doesn't stop accruing interest when the build is finished. Development exit finance can refinance the outstanding loan onto lower-cost finance while completed units are sold or let.
Practical completion doesn't necessarily mean the development finance is finished. If units remain unsold, the original development facility may continue to accrue interest at development finance rates while the scheme is marketed. Exit finance provides an alternative once the asset is complete, allowing developers to repay the development loan and fund the remaining sales period with a bridge secured against the finished property.
At a glance
- It's short-term finance used to repay a development loan once a project is complete or nearing practical completion.
- It can replace typically higher-cost development finance with lower-cost finance while completed units are sold or let.
- Typical LTV is around 70%–75% of the completed property's value, depending on the scheme and lender.
- Typical terms are 6–18 months, giving the developer time to sell the remaining units or refinance.
What is development exit finance?
Development exit finance is a bridging facility used to repay an existing development loan once a scheme is practically complete, replacing it with finance secured against the finished property.
It is different from a development loan because the lender is financing a completed asset rather than construction work in progress. This generally means there is no ongoing build risk, although the lender will still assess the property's value, marketability and proposed exit.
Why do developers use exit finance?
- Reduce interest costs — exit finance is typically priced below development finance because the construction risk has been removed.
- Avoid selling under pressure — a lower ongoing finance cost can give the developer more time to achieve a suitable sale price rather than accepting a discounted offer simply to repay the development loan.
- Release equity — where the completed property's value supports additional borrowing, funds may be available for working capital or the next development.
- Manage staggered sales — the facility can provide time to sell remaining units individually rather than requiring the whole scheme to be sold immediately.
What do lenders look for?
Lenders will typically want to see:
- Practical completion or a scheme that is very close to completion
- A valuation of the completed development
- Details of units already sold and any agreed sales
- A credible marketing and sales strategy for unsold units
- Evidence that the proposed exit — usually sales or refinancing — is realistic
- Details of the existing development finance and the amount required to repay it
Because the property is finished, the application can often be more straightforward than the original development finance application.
Typical development exit finance terms
LTV is generally based on the value of the completed property, with some lenders offering around 70%–75% LTV, although the maximum depends on the scheme, property type, location and overall strength of the exit.
Terms commonly run for 6 to 18 months, giving the developer time to sell the remaining units. Pricing is generally closer to standard bridging finance than development finance, reflecting the lower risk associated with a completed asset.
Frequently asked questions
How is development exit finance different from a development loan?
A development loan funds the build itself, released in stages against construction progress. Development exit finance is used after practical completion, refinancing the existing development loan onto lower-cost terms while units are sold.
Do all units need to be unsold to qualify for exit finance?
No. Exit finance is commonly used even when some units have already sold, refinancing the remaining balance on the development loan across the unsold or unlet stock.
Can development exit finance release cash for a new project?
Often, yes. Where the completed development's value supports a higher loan than the outstanding development debt, the surplus can be released as working capital, commonly used to fund a deposit or costs on the developer's next site.
