Why Development Finance Has So Many Fees
You’ll find development finance carries more fee lines than almost any other commercial loan, and they compound. The headline monthly rate is only one part of what the facility actually costs you.
You stack six or more fee lines on top of the rate: arrangement, exit, monitoring, valuation, legal and broker, all of them payable before a single unit sells. Your appraisal only works if every one of them is in it, and they reach you at different points in the process, which is how two or three end up missing from the same spreadsheet.
Two facilities quoted at the same monthly rate can leave you thousands apart once the fees are in. The real cost is the fee stack, not the rate. You see that plainly at the year-end, when the fees and the rolled-up interest finally sit in one column, but by then the choice is long made.
Lender Fees: Arrangement and Exit
You’ll pay an arrangement fee at the start, usually 1 to 2% of the loan. On a £1.5m facility a 1.5% fee is £22,500, and on a 12-month loan that 2% is effectively another 2% a year on the rate.
At 0.5 to 1% of the loan where it’s charged, the exit fee is the negotiable one: not every lender applies it, and a repeat borrower or a competed deal can often get it trimmed.
The arrangement fee often never leaves your bank account at all. It’s deducted from the first tranche and added to the loan, which is easier on your cash flow at the start and dearer by the end, because you then pay interest on the fee for the rest of the term.
Third-Party Fees: Surveyor, Valuation, Legal
You pay the monitoring surveyor who certifies each drawdown, and it isn’t a lender fee: it’s a cost of the product. Expect an appointment fee, a charge per site visit, and a final certificate, totalling roughly £3,000 to £10,000 on a standard residential scheme.
At £2,000 to £5,000 for a Royal Institution of Chartered Surveyors (RICS) valuation and £3,000 to £8,000 for the legal work, these are the lines that get forgotten, and you pay the lender’s solicitors as well as your own.
Your own solicitor’s bill is only half of it. Both halves grow with the complexity of the security rather than the size of the loan, so a second charge, a leasehold title or an extra party on the deal adds time to each invoice. All of it falls due before drawdown, which means it comes out of your cash flow at the point when you have least to spare.
Broker Fees and Interest
You’ll usually arrange the facility through a broker, and a broker fee of around 1% of the loan is payable on completion. Whether that’s money well spent depends entirely on the broker: one with real access to the specialist lenders can win the fee back in the rate, and one who sends your file to the same three names cannot.
Your interest is still the biggest cost by far. Charged monthly, rolled up on drawn balances and repaid at exit, it grows with the rate, your drawdown profile and the length of the build and sell-through.
Your drawdown profile is where you have most control. Interest is charged on what you have drawn, not on what you have been offered, so a tranche taken early and left sitting in the account is quietly charging your cash flow for money the build hasn’t used yet. Draw to what the build actually needs that month, and the timeline does the rest.
Default Interest: The One to Avoid
You’ll meet the harshest cost if the loan isn’t repaid by its maturity date. Lenders typically switch to default interest, often 2 to 4% a month or well above the contracted rate, until the facility clears.
At 2 to 4% a month, default pricing is why a credible, evidenced exit is the single best insurance: clearing or refinancing before maturity keeps you off it entirely.
The mistake is treating your maturity date as a target rather than a deadline. Sales run late for reasons nobody on the scheme controls, so the moment to arrange a development exit bridge is while the lender still has a choice about you, which means weeks before maturity and not the week after it.
Development Finance Fees FAQs
What fees does development finance charge?
Development finance has more fee lines than most commercial loans. Alongside the monthly interest you’ll typically meet an arrangement fee (1 to 2% of the loan), sometimes an exit fee (0.5 to 1%), monitoring surveyor fees (around £3,000 to £10,000), a RICS valuation fee (about £2,000 to £5,000), legal fees for both sides (roughly £3,000 to £8,000 combined), and a broker fee (around 1%). Interest, usually rolled up, is the largest cost, and default interest applies if the loan isn’t repaid on time.
How much is the arrangement fee on development finance?
The arrangement fee is usually 1 to 2% of the total loan, charged at the start of the facility. On a £1.5m facility, a 1.5% arrangement fee is £22,500. It’s a one-off cost, but on a short 12-month term a 2% fee is effectively another 2% a year on top of the interest rate. Many lenders deduct the fee from the first tranche advance rather than requiring it from developer equity, which adds it to the loan and means it accrues interest.
Do I pay the monitoring surveyor and legal fees?
Yes. The developer pays the independent monitoring surveyor who certifies each drawdown (an appointment fee, a charge per site visit and a final certificate, totalling roughly £3,000 to £10,000 on a standard residential scheme), the RICS valuation (about £2,000 to £5,000), and the legal costs of both sides. Standard practice is that the developer pays the lender’s legal costs in addition to their own, typically £3,000 to £8,000 combined for a straightforward transaction.
What is default interest on development finance?
Default interest is a higher rate charged if the facility is not repaid by its agreed maturity date, often 2 to 4% per month or materially above the contracted rate, until the loan is cleared. It’s one of the strongest reasons to have a credible exit strategy in place before the facility matures. Development exit finance is specifically designed to refinance a maturing development loan and avoid default interest during the sales phase.
How we reviewed development finance fees
What we covered. We explain the fees on development finance in 2026: arrangement, exit, monitoring surveyor, valuation, legal and broker fees, plus rolled-up interest and default interest. We don’t rely on comparison-site summaries or aggregator data.
Data sources. Fee ranges were checked against primary sources in July 2026, including specialist lender product pages, monitoring surveyor and valuer fee scales, and the lenders we assess in our development finance reviews and roundup.
How we handle gaps. Where a fee varies by lender or by scheme, we give the market range rather than a single false-precision number, and we flag that your actual costs depend on scheme size, complexity and the parties involved.
Update cadence. We re-verify this page regularly, and whenever market pricing moves. The verification date reflects the most recent full review. Some links on this page are affiliate links, see our editorial policy.
Regulatory note. This page is editorial content, not regulated financial advice. Development finance to a limited company or investor is generally unregulated lending, so compare facilities and read the terms before you sign.