Two developers can take the same site to the same lender and be quoted very differently. Pricing in development finance is not a rate card — it is a risk assessment. Here is what moves it.
The four parts of your cost of capital
Almost every development facility is priced across four components: the interest margin (usually over a reference rate such as SONIA or the lender's base), an arrangement fee taken on drawdown, an exit fee charged on redemption, and the professional costs of monitoring — valuation, quantity surveyor and legal.
Comparing headline margins alone is the most common mistake developers make. A facility with a lower margin and a 2% exit fee on GDV can easily cost more than a higher-margin facility with no exit fee, particularly on a longer programme.
Leverage is the single biggest lever
Pricing steps up sharply as you move through loan-to-cost bands. Senior debt at 65–70% of cost sits at the sharp end of the market. Push to 80–85% of cost and you are typically layering stretch senior or mezzanine capital, which is priced for the additional risk it absorbs.
If you can put more equity in — or bring in an investor for part of it — model both structures side by side. Higher leverage often still wins on return on equity, but you should see the numbers rather than assume it.
Exit certainty prices better than anything else
Lenders are pricing the probability of being repaid on time. A contracted disposal to a registered provider, a forward-funded commercial letting or a pre-agreed development exit facility removes the sales risk that most of the margin exists to cover.
This is why affordable-housing partnership schemes and pre-sold sites consistently access the most competitive rates in the market: the security is the same, but the exit risk is materially lower.
Track record and evidence quality
Credit committees discount optimism. A build cost supported by a priced tender or a QS-backed schedule, and a GDV supported by genuinely comparable evidence, both reduce the risk premium in your quote.
That is the practical value of a funder-ready appraisal: it moves the conversation from negotiating over your assumptions to pricing your scheme.
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