Bridge Loan for Developers

The Developer Loan is a type of mortgage financial tool aimed at facilitating a developer’s construction or rehabilitation of a property. The objective of this type of loan is for the developer to have access to needs such as land acquisition, necessary permits for the work, construction contracting costs, finding buyers for the property, and its subsequent financing.

This type of financing usually develops in two parts. On one hand, there is the construction phase, in which the developer only has to pay the amount of interest rates previously set by the financial entity issuing the loan. This is the moment when the developer must focus on finding buyers for when the renovation or construction is ready. The interest rates set are subject to the movement of the real estate market to ensure the project is amortised over a set period.

Once the construction or renovation is ready, it moves to the sales phase, where the developer’s efforts to find those buyers will be reflected, and the investment in the real estate product will be amortised. The property buyer can subrogate this type of loan, thus acquiring the debt that the developer contracted with the financial entity to carry out the project plan. Buyers benefit from certain savings when purchasing the property but must assume the conditions previously established by the developer and the financial entity. In this phase, the interest rates differ from those stipulated in the construction phase, as the financial entity links the final buyer of the property to proceed with the collection of the product.

Generally, developers are granted a loan covering around 80% of the project financing, ensuring the project will not be cancelled due to lack of financing, provided the project development adheres to the previously established budget.

If these properties do not move to the sales phase and remain vacant, the developer must repay the entire loan plus the established interest until the loan contract’s expiration date or until the sale of said properties. If the buyers do not accept the financing conditions stipulated, the loan granted to the developer is cancelled.

The Developer Loan is the financing path that best fits the business needs of the entrepreneur in question, ensuring their projects develop according to plan, as negotiations with the financial entity are always conducted based on the entrepreneur’s needs, offering the best solutions for development.