What actually moves construction finance pricing
Two developers can take near-identical projects to the same lender and be quoted very differently. Pricing on a construction facility is not a rate card being read out — it is an assessment being priced. Understanding what actually moves it is the difference between accepting a number and negotiating one.
The lender's own cost of funds
Every lender — bank or non-bank — is paying for the money it lends. That cost moves with the broader rate environment, with the lender's funding lines, and with how much competing demand exists for the same capital. It sets the floor. Nothing about your project changes it, which is why comparing across lenders matters more than negotiating hard with one.
Risk appetite at that moment
Above the floor sits appetite, and appetite is not constant. A lender that is heavily weighted to apartments in one market will price the next apartment deal in that market defensively — or decline it — regardless of merit. The same deal presented to a lender actively building that book prices differently. This is the single most under-appreciated variable, and it is why lender selection is a genuine skill rather than a formality.
Where the facility sits in the stack
A first mortgage carries first claim on the asset and prices most keenly. A second-ranking or mezzanine layer sits behind it, is repaid only after the senior lender is made whole, and prices for that additional risk. Preferred equity sits behind the debt again. The further down the stack the money sits, the more it costs — and that hierarchy holds regardless of which lender you approach. Read more on first versus second mortgage security.
Leverage against the project's own numbers
How much of the total development cost you are asking a lender to fund is priced directly. So is the buffer between the debt and the project's realisation value. Both are assessed against the feasibility, not against a policy table — which means the quality and defensibility of your feasibility assumptions affects pricing, not just approval.
Presale or lease-up coverage
Contracted presales, or signed leases on a commercial asset, transfer some of the exit risk off the lender. Coverage is priced. So is the quality of that coverage — deposit levels, settlement terms, purchaser profile and whether the contracts are genuinely unconditional all get looked at. Thin or fragile coverage is not the same as no coverage, and it is not priced the same way.
Builder and contract risk
The building contract is a credit document. Its form, whether the price is fixed, the builder's financial capacity, their track record on comparable work, and the retention and variation mechanics all bear on the lender's confidence that the project will complete for the number in the feasibility. A weak builder covenant on a strong site is still a weak deal.
Sponsor track record and conduct
Experience delivering comparable projects reduces perceived execution risk. So does clean conduct on existing facilities. Neither is decorative — a credit assessor reading a file with evidence of prior delivery and prior good conduct is assessing a materially different risk than one reading a first-time file.
How well the deal is actually presented
This is the variable developers most often overlook and the one they have most control over. A submission that anticipates the credit questions, exposes its assumptions, evidences the exit and addresses the obvious objections before they are raised is assessed faster and more favourably than the same deal presented as a pile of attachments. It does not change the project's risk; it changes how accurately that risk is understood. See what drives a non-bank approval timeline.
What this means in practice
Pricing is negotiable in the parts that reflect assessment, and fixed in the parts that reflect funding cost. Knowing which is which — and knowing which lenders are currently building the book your project fits — is where an experienced adviser earns their keep.
Talk to Siare's development finance advisory team about how your project is likely to be read and priced.
This is general information about business and investment-purpose finance only. It is not financial, legal or tax advice and does not take account of your objectives or circumstances. All finance is subject to lender assessment, valuation and approval.