If you are new to the world of property development you may be unaware of the kinds of financing tht are available for these projects. Some types are more appropriate for certain kinds of development projects and the requirements attached to financing may vary from project to project. For example, you may need to put more money down and pay a different interest rate if you are purchasing a commercial versus a residential property. Here is a breakdown of some of the kinds of financing that are available.

Residential Property financing

Financing used to purchase a residential property is usually the kind of financing that people are most familiar with. This is because residential property financing is used to secure a person’s primary residence. However, the type of financing that you would look for in order to purchase an income property or a property that is not your primary residence will often be very different than what you would be trying to secure for your own home.

Although there are set mortgage rates this is usually not the case with financing that is obtained for development projects. You will often need to provide information such as how much property development experience you have and what the scale of the project will be. The rates you pay will vary from lending institution to lending institution and from project to project.

You will often need to put more money down on a development project than you would on a property that you plan to live in. This will often include the building costs as well as the cost of the real estate that is being built on.

Financing for Commercial Properties

Like residential development projects, the rates you will pay to secure financing for a commercial property will also vary significantly. You may need to speak at length to lending institutions about the project and how viable it is. You may also find that there is a good deal more of involvement from a lending institution on a commercial development project than there would be on a residential development project.

A much larger deposit is often required for a commercial property and the interest rates are often higher. You may also need to provide a large amount of data and documentation surrounding the project that you want to begin working on. You may find that certain lending companies may be more willing to take on a commercial project than others will so don’t be afraid to do a bit of searching if you are not getting a good response from the first lending institution you approach.

Bridging Financing

There are times that short-term funding may be required to be able to take on a development project. In this case you may want to look at bridging finance opportunities. They are usually for a period of not more than one year although different lending institutions will have a range of terms for you to look at and compare.

By learning what your different financing options are you will be able to get the money you need to be able to take on those property development projects you find most appealing.