Bridging Loans for Land

How much can I borrow?

We can bridge against land at up to 65% loan to value (LTV), and will even lend up to 100% LTV with additional security.

We can fund loans between £25,000, with no maximum loan size.

The amount you can borrow will depend on the value of the security offered. If you’re looking to maximise your borrowing, you may choose to let the borrower secure against another property, in addition to the land.

If the additional security is in reasonable demand, such as a residential property, you may benefit from a reduction in the interest rate.

How much will it cost?

This depends on several factors such as where the land is, what it is used for and whether or not it has the relevant planning permission for the intended use.

If the land has the relevant planning permission to build on and the location is deemed to be good you could expect to pay a rate of around 0.95% per month. If the land has no planning and the location is less desirable, 1.25%-1.5% per month is realistic.

In addition to the monthly interest cost, lenders charge an arrangement fee – a fee for setting up the loan. This fee is usually between 1.5% and 2% of the loan amount, although this is sometimes discounted as low as 1% for larger loans.

How quickly can I complete?

If the loan is for land acquisition and none of the legal work has begun, 14 days is realistic. If you are looking to release equity from land and a valuation is needed, you could expect funds within seven days of full lender application.

Do you offer loans against land without planning permission?

Yes, we can offer finance whether planning permission is in place or not. Although the process may be slightly different, borrowing is still usually achievable.

There needs to be a realistic exit strategy in place and any lender will expect a realistic way of disposing of the asset in the event of default. As such, land without planning should be desirable in some way to ensure that it’s seen as suitable security.

Land bridging loan uses

There are many reasons why people choose to take out this type of borrowing. Some of the more common reasons are as follows:

• To complete the purchase of a piece of land quickly.
• To raise capital needed to use elsewhere.
• To fund a planning application, allowing the land to ultimately be developed.
• Completing a purchase that has been agreed subject to planning.

How is my application assessed?

Although your personal circumstances will be checked when looking to make a new application, they aren’t the whole story. Lenders will look at the following info about you:

• What your current financial situation is.
• What you’re planning to do with the funds raised and how this might affect your finances.
• Whether you can keep up the repayments if paying the interest monthly.
• Your credit history may be taken into consideration by some lenders.
• Your experience in this type of transaction.

In addition, the lender will look at the security offered. The key questions here will be:

• Is the land suitable security?
• What is the value of the land?
• What is the exit strategy and is it realistic?
• Does the land have planning permission?
• Is there any alternative use of the land should the proposed exit fail?

Purchases subject to planning

Many property investors and developers agree to purchase land subject to planning. This means that the buyer is only required to complete the purchase once planning has been granted.

In this situation, there is potential to add significant value to the site prior to purchase through planning gain.

Where this is the case, we’re often able to fund loans based on the increased value, with little to no deposit needed in some cases.

Why are the rates higher than those for loans secured against property?

Land is a less liquid asset than property, which means any sale price is less predictable should a sale be required quickly.

Although the rates are slightly higher, they are highly dependent on the quality and desirability of the site.

As there is a smaller pool of buyers for land, especially land without planning, it leads to a more cautious approach from lenders. As such, lenders price their loans based on a perceived higher risk.

Will I be eligible for a land bridge loan?

Although you will be subject to the above criteria points with most lenders, we can offer funding to most applicants, as long as the loan to value is acceptable.

Issues such as previous credit problems, lack of experience or a low net worth can reduce your choice of lenders, but there are still usually options.

Is a land bridging loan hard to obtain?

Generally speaking, they aren’t any more difficult than funding against property, although each application is assessed on its merits.

Land without planning is more difficult than sites with full planning permission, due to the inherent planning risk.

Although this is the case, some factors can increase the desirability of land with no planning permission. The biggest selling points are lapsed planning permission, inclusion in the local plan or a strong alternative use.

Who can take out a land bridging loan?

We can offer finance against land to a range of borrowers, including:

• Individuals
• Offshore companies
• Partnerships
• Limited companies
• LLP / other company structures
• Pension funds (where the pension fund is allowed to borrow money)

What are acceptable exit strategies?

As mentioned above, the exit strategy is up there with loan to value for the most important factors in assessing a land bridging loan.

There are some common methods of repaying land bridging finance are:

• Sale of the land after planning has been granted.
• Refinance to a self-build mortgage or property development finance.
• Refinance to a commercial mortgage (depending on the use of the land).