From a duplex
to a site.

How much can I borrow for a small development?

It depends on which lender tier fits the project. Banks lend around 60 to 70 per cent of total cost and 60 to 65 per cent of the gross realisation value, and want presales. Non-banks stretch to 70 to 80 per cent of cost with light or no presales. Private and stretch-senior lenders go further again, at a higher price. The rest is your equity, usually 20 to 35 per cent of cost.

Two numbers get confused constantly. Loan-to-cost is the loan against what the project costs to build, including land, construction, consultants and interest. Loan-to-value on GRV is the loan against what the finished stock will sell for, net of GST and selling costs. A lender tests both and lends to the lower result. If a project only works at 85 per cent of cost, it is usually the feasibility that needs work, not the lender.

Do I need presales to get development finance?

For a bank, almost always: commonly enough presales to cover the debt. For a non-bank, often not, or only a portion. Some private lenders need none at a lower loan-to-value and a higher rate. Fewer presales means more equity or more expensive money, never a free pass.

Presale contracts also have to be "qualifying": arm's length, with a real deposit, to buyers who can settle. A two-townhouse project on a suburban block in Melbourne's east can often go non-bank without presales if the equity is there; a six-unit site generally cannot. We will tell you which side of that line you are on before you pay for plans.

What does development finance cost?

Indicatively, bank construction debt sits in the mid-sevens, institutional non-bank money around 8.5 to 11.5 per cent, mid-market non-bank 9.5 to 13, and short-term private senior debt 10.75 to 14 per cent, plus a 1 to 3 per cent establishment fee. Mezzanine and second-mortgage money runs well into the teens. All of those were quoted before the September 2026 rate rise.

Interest is usually capitalised into the facility and paid at the end from sales, which means it sits inside the loan-to-cost calculation. Line fees on undrawn money, QS inspection fees for each drawdown, and exit fees of up to 1 per cent are the other line items people forget. We put every one of them in the feasibility.

How do progress drawdowns work on a development loan?

An independent quantity surveyor signs off the budget at approval and then certifies each builder claim against work done. The lender releases that amount, interest accrues on the drawn balance, and the cycle repeats until practical completion.

Cost overruns are the usual reason a development stalls, and the QS is your friend here: a lender will not fund a claim the QS will not certify. Keep a contingency of 5 to 10 per cent of construction cost in the budget, and keep it in cash or an approved contingency line rather than in hope.

• Fixed-price building contract with a registered builder.
• Planning permit, endorsed plans and a building permit before the first construction draw.
• "To be constructed" valuation and a QS report at approval.

What happens when the build finishes and the units have not all sold?

A residual stock loan refinances the construction debt against the completed units, typically at 60 to 70 per cent of value from a bank or 65 to 80 per cent from non-bank and private lenders, interest-only for six to 24 months, with each unit released from the mortgage as it sells.

It is cheaper than extending a construction facility that has gone into default pricing, and it buys time to sell into a better market or lease up and hold. We plan the exit at the start, not at completion, because the exit is what every development lender is really pricing.