Planning Gain Finance
Planning gain finance allows you to raise funds to borrow funds to take a project through the planning process.
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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 with the local council or local planning authority (LPA) to develop property or land, and it being granted.
It’s usually needed if you are building something new, extending larger than permitted development (PD) rights allow or if you’re changing the use.
Planning gain is a strategy used by property investors to increase their returns. For example, in most cases land with full planning permission is more valuable than land with no planning permission.
It can also be used to describe the practice of making an amendment to planning permission, i.e. changing from a 3 bed to a 4 bed house.
How does it work?
This type of borrowing is designed to allow investors to purchase sites, either land or property, that have the potential for planning permission to build, extend or change the use of the property.
Once the site is purchased, a planning application is then submitted and once approved, the site will generally have increased in value. This can then be sold for a profit or developed by the borrower.
The finance is only generally used to fund the planning process, and 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.
The common uses are to gain planning permission on parcels of land, and to convert commercial property into residential, i.e. offices to flats or a semi-commercial property into full residential.
To find out more, read our guide to using property refurbishment to increase your property investment returns.
Key product features
Key Features
Max LTV
Up to 80%
Interest rate
From 0.45% per month
Charge types
1st & 2nd considered
Term
1-36 months (maximum 12 months for regulated bridge loans)
Interest type
Added to the loan, deducted or serviced
Completion timescale
5 days – 3 weeks
Criteria
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 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 |
| Residential (Unregulated) | 85% | 0.45% |
| Residential (Regulated) | 75% | 0.55% |
| Commercial | 70% | 0.55% |
| 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:
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.
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.
How to get a bridging loan for planning gain
Which lenders offer planning gain finance?
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, often called challenger banks.
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.
Frequently Asked Questions
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 extremely rare. In most cases, a full valuation of the land is needed, which takes time.
In general, you can expect your planning gain bridging loan to take between 5 days – 3 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.
