Financing Services

Development Financing for Residential Subdivision

  Financing Available up to $600M   

A residential subdivision development project refers to the course of legally dividing raw land into several plots to be developed, sold, or transferred. For instance, as opposed to purchasing one city block of land, your development company can legally transform that block into ten, twenty, or even more lots to develop to maximize profit.

Building a residential subdivision carries numerous benefits for residential developers, as well as construction companies. This is because subdivision development carries financial potential and is attractive to builders and investors.

If you are a residential subdivision developer, your best option is to consult with professionals here at TMLENDING, who hold a wide range of experience and resources. We help our clients finance their entire process, from obtaining raw land to developing the land, to building residential homes, to fruition. Note, at the time of land acquisition of your subdivision project, greater down-payment costs may be associated due to high risks. We aid our clients to ensure that adequate finances are available in addition to loan qualification.

Subdivision development projects all come with possible setbacks to consider. Potential considerations would be the measure of paperwork, unanticipated expenses, and development delays that may appear after one has already invested in the subject project. Notwithstanding, a well-managed subdivision development carries excellent fiscal potential as it can be divide amongst numerous uses and plots. Keep in mind, your subdivision will yield the best profit when sold or leased strategically


In Ontario, the average annual interest rate for residential subdivision development is typically 7.25%. However, this rate can vary depending on the size of the loan, as smaller loans tend to carry higher interest rates due to the lack of economy of scale.

Once the development is finished, there are several potential exit strategies that can be considered. These include selling the property and using the proceeds to pay off the loan, taking out a construction loan to retire the existing land loan, or refinancing the construction loan with a bank or institutional lender at a lower interest rate. This last option is often chosen by developers who plan to keep ownership of the property or rent out the units.

You will typically need to repay your land development finance loan once the project is complete. Some lenders may require interim interest payments, but usually, the interest is rolled into the loan and the total capital plus interest is paid back at the end of the development.

Even without planning permission, it is still possible to secure land development finance. Although it is easier to find competitive lending with planning permission, you can still borrow up to 85% of the anticipated project value. Planning can increase the valuation estimate of a plot by as much as 30%, meaning you may be able to borrow more.

When applying for Land development financing, an appraisal from a licensed Real Estate Appraiser is necessary. The Appraiser will visit the building site and assess the property attributes, building plans, quotes, specifications, and land features. This will enable them to determine the fair market value of the home once it is completed.