Skip to main content

Development Loans

Development loans are financial products specifically tailored to fund real estate development projects, such as the construction of residential, commercial, or mixed-use properties.

These loans provide developers with the capital necessary to acquire land, finance construction costs, and cover other expenses associated with the development process.

Due to the higher risk nature & capital requirements of these loans, the major banks may not consider. For this reason we utilise Mortgage Funds at Smyth Loan Co, who specialise in these development applications and look at every scenario on a case by case basis.

Most development applications require a substantial amount of capital for a lender to consider – the maximum loan amounts normally range from 60-70%.

These loans are great for any unit developments with 3 or more units, builders looking to construct their own properties & later sell off, or even funding of private projects that are normally out of scope by most banks.

As long as serviceability is there or pre-sales are held, & sufficient equity in the form of cash deposits or equity in other property is available, most developments (within reason) that have been approved by the relevant local building authority can be considered.

Here’s a brief overview of development loans and how they work:

  1. Purpose: Development loans are intended to finance various stages of real estate development projects, including land acquisition, site preparation, construction, and infrastructure development. These loans are typically used by experienced developers, builders, or investors looking to undertake large-scale development projects.

  2. Loan Structure: Development loans are structured differently from traditional mortgages or personal loans. Instead of providing a lump sum upfront, lenders usually disburse funds in stages or “draws” based on project milestones. This phased approach ensures that funds are released as needed throughout the development process, reducing the risk for both the borrower and the lender.

  3. Collateral: Development loans are often secured by the underlying real estate assets being developed, as well as any additional collateral provided by the borrower. This provides lenders with a level of security in case the borrower defaults on the loan. Lenders may also conduct thorough assessments of the development project’s feasibility, market potential, and risk factors before approving the loan.

  4. Interest Rates and Terms: Interest rates on development loans may vary depending on factors such as the borrower’s creditworthiness, the size and scope of the project, prevailing market conditions, and the lender’s risk assessment. These loans typically have shorter repayment terms compared to traditional mortgages, with repayment periods ranging from a few months to several years.

  5. Risk Management: Development loans carry inherent risks, including construction delays, cost overruns, zoning or regulatory issues, and market fluctuations. Lenders mitigate these risks by conducting comprehensive due diligence on the borrower, the project, and the surrounding market conditions. Borrowers may also be required to provide detailed project plans, financial projections, and contingency strategies to secure financing.

  6. Exit Strategy: Lenders often require borrowers to have a viable exit strategy in place to repay the loan once the development project is completed. This may involve selling or leasing the developed property, securing permanent financing, or other means of generating revenue to repay the loan principal and interest.

  7. Specialised Expertise: Given the complexities involved in real estate development, borrowers often work with lenders who specialise in development financing. These lenders have expertise in evaluating development projects, assessing risk factors, and structuring loan agreements tailored to the unique needs of developers and investors.


In summary, development loans play a crucial role in financing real estate development projects by providing developers with the capital needed to acquire land, finance construction, and complete development projects. These loans are structured differently from traditional mortgages, with funds disbursed in stages based on project milestones. Development loans require thorough due diligence, collateral, and exit strategies to mitigate risks and ensure successful project completion.

Smyth Loan Co has access to many options in the Development Loans space and are more than happy to assist anyone looking into a new project.

Ready to make the move?

Get in Touch