Planning gain finance explained
What is planning gain finance?
Planning gain finance is a type of short-term loan used to fund a property transaction while planning gain is achieved. These loans are secured against property and are a type of bridging loan.
What is planning gain?
Planning gain is the process of applying for planning permission against a property or land, and it being granted.
Planning gain is a strategy used by property investors to increase their returns.
How does it work?
This type of borrowing is designed to allow investors to purchase sites, either land or property, that has potential for planning permission.
Once the site is purchased, a planning application is then submitted. Once this is approved, the site will generally have increased in value and can be sold for a profit or developed by the borrower.
Finance is only generally used to fund the planning process. Once permission has been granted, development finance is generally used to fund the development project.
What is it used for?
These facilities are designed to fund the planning process and can be offered against almost any security, as long as it has planning potential. If you’d like learn more about this type of lending, our bridging homepage sees bridging loans explained further.
To find out more, read our guide to using property refurbishment to increase your property investment returns.
Key product features
|Max LTV||Up to 80%|
|Interest rate||From 0.43% per month|
|Charge types||1st, 2nd & 3rd considered|
|Term||1-36 months (maximum 12 months for regulated loans)|
|Interest type||Added to the loan, deducted or serviced|
|Completion timescale||5 days – 3 weeks|
- Residential, commercial property or land acceptable
- Available to individuals, partnerships, LLPs, Ltd companies, offshore companies, foreign nationals and pension funds
- Minimum applicant age 18 years – no maximum age
- Available in England, Scotland, Wales and Northern Ireland
- Adverse credit accepted (on a case by case basis)
- Loans from £25,000 with no maximum loan size
Planning gain finance criteria
Who can apply?
We can lend to the following:
- Non-UK based individuals
- Pension funds
- Limited companies
- Offshore companies
What term can you offer?
We offer loans from 1 month up to 24 months.
Can you lend to borrowers with bad credit?
Previous adverse credit doesn’t usually cause a problem for us, however it may restrict your choice of lenders slightly.
We can arrange loans for borrowers who have previous defaults, CCJs, mortgage arrears, IVAs, bankruptcies and repossessions.
How much can I borrow?
We offer facilities from £25,000 with no maximum loan size.
What loan to value (LTV) can you offer?
We can fund up to 80% of the current market value of the security property.
If you’re looking for more, we can lend up to 100% of the current open market value, if you’re able to offer additional security.
The maximum LTV may vary depending on the type of security offered, e.g. Residential property, commercial property or land.
They key to a successful bridging loan application is your ability to repay the loan at the end of the term.
For planning gain applications, the lender will want to see that you’re able to repay the loan both in the event of planning being successful – and if it isn’t.
Sites that have previous failed planning applications may take a little longer to sell and as such, the lender will want to ensure that there is plenty of time to exit. This may result in the lender insisting on a slightly longer term for the loan.
Planning gain finance rates & costs
What interest rate will I pay?
The interest rate charged will depend on what is currently on the site and the loan to value requested. We offer bridging loans on the following terms:
|Security||Max LTV||Rates From|
|Land With Planning||65%||0.75%|
|Land Without Planning||50%||1.00%|
Are there any other charges?
Yes, as part of the application process, you will also be charged a number of fees. The main ones are the following:
Lender arrangement fee – Lenders charge a fee for setting up the loan, usually 1-2% of the loan amount. This fee is usually due when the loan completes and can usually be added to the loan.
Lender exit fee – Some lenders charge an exit fee, which becomes due when the loan is repaid. This is becoming less common and where possible, we always look to work with lenders who won’t charge you an exit fee.
Broker fee – Many brokers charge a fee for their service, this is usually paid on completion, however some also charge upfront fees. We don’t charge a fee for our service.
Valuation fee – This fee is paid to the lender to instruct a RICS surveyor to visit the property and complete a survey report on it.
Legal fees – You will be expected to cover both your own and the lenders legal costs, which is standard across bridging loan providers. These fees are generally paid late on in the application process, usually in 2 parts – the first when the solicitor begins their work and the balance on completion.
How to get a bridging loan for planning gain
Which lenders offer planning gain finance?
These loans are generally offered by bridging loan lenders, rather than the well-known high street banks.
These lenders may be banks themselves, but are usually lesser-known, specialist ones.
Most lenders are independent specialist bridging loan lenders, and each lender may be subject to a different level of regulation and offer different levels of protection to you, should anything go wrong.
Working with a broker
The role of a broker is to manage your application from start to finish. This means they support you in understanding your needs, finding you the best possible deal and then ensuring the application completes without issue.
As some brokers charge a fee for their service, they can add cost, so using a fee-free broker is usually good practice.
Planning gain finance is a specialist area, so when looking to work with a broker, it’s important that they have experience in arranging this type of finance.
How long does planning gain finance take to complete?
We can fund your bridging loan the same day, where the valuation and legal pack are already fully completed, although this is very rare.
In general, you can expect your planning gain bridging loan to take between 5 days – 2 weeks to complete.
Where there are complexities with the project, or previous declined planning applications, your application may take a little longer.
How will my application be assessed?
The lender will need to be comfortable with the security offered in its current form. This will protect them in the event of planning permission being declined.
In most cases, the lender will want to know what your backup plan is should your planning application be refused.
Some lenders may have experience in planning gain and will look at the viability of your proposed application. To give them a picture of this, they will tend to look at the following:
- The planning history of the site/land. Previously declined applications may indicate that the planning is difficult to achieve on the site.
- Is the site in the local plan?
- Is there precedent locally which would suggest that your application is likely to be successful?
- Is the proposed application suitable for the area?
- Do you or your architect have experience of these types of applications in your area?
Of course, this list is not exhaustive, but will give you some idea of the checks undertaken.
Can you fund my development once planning has been granted?
Yes, we’re able to offer finance for property development for most projects and can help both experienced and inexperienced developers. This ranges from property development right through to bridging loans for property developers.
Where an agreement in principle is required from a development finance lender to prove your exit strategy, we will be able to arrange this for you.