5. Calculation of Finance Flashcards
What are the choices of interst rate?
- The current SONIA rate (Sterling Overnight Index Average)
- Bank of England Base rate plus premium
- Rate at which the developer can borrow the money
What is compound interest
An interest calculated on both the initial amount and the accumalited interest over time.
What are the THREE elements for finance: The developer needs to borrow money for the:
- Site purchase (include purchaser costs) - compound interst (straight-line basis)
- Total construction and associated costs - calculation based on an S-curve taking half the costs over the lenth of the build programme
- Holding costs to cover voids until the disposal of the scheme (empty rates, service charges and interest charges) - compound interst on a straight line basis.
Talk me thorugh the site purchase element of finance
Finance for borrowing the money to purchase the land is calculate on a stright line basis using compound interst over the length of the development period
Talk me thorugh the total construction and associated costs element of finance
Assume total construction costs (including fees) over half of the time period using an ‘S’ curve calculation.
The principle of the ‘S’ curve is that as the payment of constriction costs adopts the profile of an ‘S’ shaped curve over the length of the development projects, the usual assumption is to halve the interest that would be borrowed for all of the construction period
The proposed S curve is to refelct when moies tend to be drawn down
Talk me thorugh the holding costs element of finance
Calculate any finance required for on-going holding costs from completion of construction until disposal on a stright line basis using compound interest
