LendInvest has underlined the benefits of development exit finance during the Covid-19 crisis.
The online property lender said that the long loan terms and cheaper rates are useful for developers that need longer to sell units in difficult market conditions.
“Right now there is widespread uncertainty across the country and the housing market isn’t immune to that,” LendInvest said in a blog post on its website. “While viewings and purchases are being encouraged again, it is unclear how long it will take to recover to pre-Covid-19 levels.
“Therefore developers can use the relative certainty development exit offers – low rates, up to 18 months to sell, rolled interest – to see themselves through the crisis without losing money on their projects.”
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Development finance can be more expensive than bridging loans, LendInvest said, which is fine when interest is rolled and you expect a quick sale after completing construction.
However, sales have slowed due to current market conditions. Development exit finance can be used to consolidate more expensive funding into a cheaper bridging loan, with the interest rolled to be paid at the end and provide a period of comfort to sell the units.
LendInvest said this buys developers time for the market to recover and secure sales at a better price once the current market shock calms down.
Viewings and purchases are being encouraged again after the housing market was reopened in England, but social distancing requirements and public concern over travelling mean that it is likely to be a slow recovery.
Earlier this month, LendInvest announced that property investors could continue looking for their next projects during the lockdown via virtual auctions in the form of live streaming and bidding conducted remotely by telephone, online or via proxy.