Mid-Build Refinance
Mid-Build Refinance is the replacement of an existing construction finance facility with a new one from a different lender, while the build is still in progress. This may happen when a developer starts with a private lender for speed and then refinances into a bank facility mid-construction, or when the original lender's terms no longer suit the project.
Why It Matters
Not every project starts with the ideal lender. A developer might use private lending to secure the site and start construction quickly, then refinance to a lower-cost senior funder once the project demonstrates progress. Mid-build refinance can reduce interest costs, unlock additional funding, or resolve issues with an existing facility.
How It Works
- The developer identifies a new lender willing to take over the facility mid-construction.
- The new lender commissions a QS cost-to-complete assessment.
- If satisfied, the new lender pays out the existing facility and takes over the first mortgage.
- Remaining construction funding is drawn down through the new facility under new terms.
Common Use Cases
- Starting with private finance and refinancing to a bank once the project is underway
- Accessing better rates or higher LTC from a different lender
- Resolving disputes or covenant issues with the current construction lender
- Restructuring the capital stack mid-project (e.g. removing mezzanine)
Related Switchboard Resources
- Townhouse Development Finance
- Refinancing
- Private Lending
- Senior Debt
- Quantity Surveyor (QS)
- Exit Strategy
Is mid-build refinancing common?
It is not uncommon, especially for developers who start with private or non-bank construction finance and want to transition to a lower-cost facility once the project is de-risked.
What are the costs of refinancing mid-build?
Costs include exit fees from the current lender, new establishment fees, valuation and QS costs, and legal fees for both facilities. These need to be weighed against the interest savings.
Can any lender take over a mid-build project?
Not all lenders will fund mid-build. The new lender needs to be satisfied with the builder, the QS cost-to-complete, the project feasibility, and the developer's track record. A broker can identify which lenders are open to mid-build takeover.