Land bridging loans
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A land bridging loan is a flexible, short-term funding solution designed for buyers and developers who need to secure land or development sites quickly. Unlike traditional mortgages, which are often unsuitable for land purchases, land bridging finance offers rapid access to capital with terms ranging from 1 to 36 months. Whether you’re buying land at auction, securing a plot with or without planning permission, or assembling a site for future development, a bridging loan for land can bridge the gap until longer-term funding, such as a development finance facility or commercial mortgage, is arranged. We work with leading land bridging loan lenders across the UK, providing competitive land bridging loan rates and flexible loan-to-value (LTV) options, typically up to 65% of the land’s value. Our tailored approach ensures that both experienced developers and first-time investors can access fast, reliable funding for land purchases, land banking strategies, or self-build projects.
Land bridging loan criteria
What is a Land Bridging Loan?
A land bridging loan is a type of short-term property finance, typically lasting 1 to 36 months, designed for borrowers needing fast funding to purchase land or development plots where traditional long-term finance (like a commercial or residential mortgage) is not suitable. It is commonly used for land purchases, property development projects, or auction transactions requiring rapid completion. With a bridging loan for land, borrowers can access up to 65% loan-to-value (LTV) on the land’s value, even without prior experience in construction, development, or commercial real estate. This makes land bridging finance an ideal choice for investors, builders, and first-time developers who need quick access to capital for land acquisitions, site assembly, or planning gain strategies.
When is a Land Bridging Loan Used?
- Auction Purchases: Perfect for land auction finance when buyers must complete within 28 days under traditional auction rules.
- Land Without Planning Permission: Useful for purchasing un-mortgageable land or sites awaiting planning approval before moving to long-term development finance.
- Commercial Land Purchases: Ideal for acquiring land intended for commercial property projects, such as warehouses, retail units, or office spaces.
- Residential Land Development: Enables buyers to secure plots for new builds or conversions, bridging the gap until a self-build mortgage or development loan is secured.
- Planning Gain or Land Banking: Allows developers to purchase land, apply for planning permission, and refinance at a higher value once consent is granted.
Key Features of Land Bridging Loans
- Loan Term: Short-term funding of 1–36 months with flexible repayment structures.
- LTV: Borrow up to 65% of the land value, with higher funding available using additional security such as other properties.
- Fast Completion: Funds can be arranged within 2–14 days, significantly faster than standard mortgages.
- Exit Strategies: Common exits include selling the land, securing development finance, or switching to a commercial mortgage.
- Versatility: Suitable for land with or without planning permission, auction properties, and mixed-use development sites.
Finance for land without planning permission
Buying land without planning permission using a bridging loan is possible, with funding typically available up to 65% Loan-to-Value (LTV). Once planning consent is secured, borrowers may be able to increase borrowing to 70% LTV on the land value and access up to 100% of build costs, provided the project meets the lender’s Profit on Cost (POC) and Loan to Cost (LTC) requirements. This approach is common among investors and developers who intend to secure planning permission for residential or commercial development or pursue other commercial land uses. Land that does not have planning permission is considered a higher-risk asset by lenders, primarily due to the uncertainty of achieving future approvals. If planning consent is not granted, the land’s value and development potential may be significantly limited, which is why many traditional lenders are reluctant to finance such purchases. Despite these challenges, we work closely with a network of specialist land bridging loan lenders who are open to financing land without planning permission. These lenders understand the strategies behind land banking, planning gain, and site development. By using a bridging loan for land purchase, borrowers can secure the site quickly, gain planning permission, and then refinance with development finance or a long-term commercial mortgage.
Buying land with planning permission
A land bridging loan for land with full planning permission is the ideal solution for borrowers who need to move quickly, whether for acquisition or initial development works. Land bridging loans can fund fast land purchases and, with planning consent in place, may also be used to support early construction stages. With a bridging loan for land, funding is typically available up to 70% of the land value, allowing borrowers to secure the site while self-funding the build. For those who can offer additional property as security, some land bridging loan lenders may extend borrowing to over 100% of the purchase price, giving access to upfront development funds. Having full planning permission significantly improves the borrowing terms available through land bridging loans UK, as it reduces perceived lender risk and allows a transition to development finance once the project begins. Unlike a standard land mortgage, which can take months to arrange, a land bridging loan UK is designed for speed, with funds often available in 2–14 days. Borrowers planning to develop the site can also access development funding, with options covering up to 75% of the Gross Development Value (GDV). This combination of a land bridging loan and development finance provides a clear path from land purchase to construction and eventual project completion.
Land Bridging Affordability
Land bridging lenders will assess the affordability of a land purchase by reviewing the borrower’s disposable income, business profits, or other verifiable income sources. If affordability cannot be fully demonstrated, some land bridging loan lenders may offer interest deducted bridging terms, where the interest is deducted upfront from the loan facility, reducing monthly payment obligations. The ability to exit and repay a land bridging loan is a critical factor for lenders. They will examine the borrower’s experience, pre-empted planning advantages, and planned exit strategies, which may include refinancing with a land mortgage, switching to development finance, or selling the land. Valuations play an essential role in confirming the viability of these exits. For some projects, non-status bridging loans are available. These allow the lender to base their underwriting decisions primarily on the strength of the deal — including the land value, planning potential, and overall profitability — rather than the borrower’s income or credit profile. This approach is especially common in land bridging loans, where the focus is often on the security and future potential of the land itself.
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COMMON QUESTIONS ABOUT LAND BRIDGING
The amount you can borrow on land depends on several factors, including whether the land has planning permission, the type of finance you use, and the lender’s criteria. Most lenders consider land purchases higher risk compared to standard residential properties, which means loan-to-value (LTV) ratios are typically lower, and deposit requirements are higher.
Typical Loan-to-Value (LTV) for Land
- Land without planning permission: Most land bridging loan lenders will allow up to 65% LTV of the land’s current value.
- Land with full planning permission: With planning approved, lenders are often willing to increase the LTV to around 70% of the land’s value, as the risk is reduced and the site has a clearer development potential.
Using additional security: If you have another property (e.g. your home) to offer as security, it may be possible to borrow up to 100% of the land purchase price, especially when using a bridging loan for land or moving into development finance.
Borrowing Through Land Mortgages
If you secure a land mortgage, most lenders will allow borrowing of up to 50–70% of the land value. However, this depends heavily on whether planning permission is in place and the land’s marketability. Higher deposits of 30–50% are typically required.
Development Finance and Gross Development Value (GDV)
For those planning to build on the land, development finance can increase borrowing limits. Many lenders will fund up to 75% of the Gross Development Value (GDV), which covers both the cost of the land and 100% of the build costs, subject to Loan to Cost (LTC) and Profit on Cost (POC) requirements.
What Affects How Much You Can Borrow?
- Planning status (full or outline permission).
- Type of finance (land mortgage vs land bridging loan).
- Borrower experience (especially for large developments).
- Property location and resale market demand.
- Additional security offered (e.g. other properties).
Getting funds to buy land requires a different approach compared to purchasing a standard residential property, as most high-street lenders do not offer traditional mortgages for land. The funding options you choose will depend on factors such as the planning status of the land, your timeline, and your long-term plans for the site. Below are the most common and effective ways to raise funds for land purchases.
- Land Mortgages
A land mortgage is a specialist loan designed for purchasing land, particularly when it has full planning permission. These mortgages typically require a larger deposit — often between 30–50% of the land’s value — due to the higher risk associated with undeveloped plots. Land mortgages are ideal for buyers who plan to hold the land long-term and want stable, lower interest rates. - Land Bridging Loans
A land bridging loan is one of the fastest and most flexible ways to get funds for land, especially when you need to complete quickly or purchase land without planning permission. Bridging loans are short-term (1–36 months) and can provide up to 65–70% loan-to-value (LTV). They are widely used for land auction finance, planning gain opportunities, and as a stepping stone to development finance once planning consent is granted. - Development Finance
If your goal is to buy land and build on it, development finance can cover both the land purchase and 100% of build costs, subject to lender criteria such as Loan to Cost (LTC) and Gross Development Value (GDV). Development finance is often used as an exit strategy after securing the land with a bridging loan. - Equity Release or Re-mortgage
Homeowners can release equity from their existing property through a re-mortgage or second charge mortgage to raise capital for land purchases. This can be cost-effective due to lower mortgage rates, but it is slower to arrange compared to a land bridging loan and not ideal for urgent purchases. - Alternative Finance and Cash Funds
Some buyers choose alternative routes such as private investment, joint ventures, or cash savings to secure land. While these options avoid lender restrictions, they require substantial upfront capital and may not be feasible for every buyer.
Which Option Is Best?
- For quick purchases or land without planning permission, a bridging loan for land is often the best choice.
- For long-term holding with planning consent, a land mortgage provides lower interest rates and stable terms.
- For construction or development projects, development finance is the most suitable route.
Criteria for a land bridging loan can differ significantly among various lenders. Many leading lenders in the land bridging loan market typically start their loan offerings at £50,000 or more. The general rule is that, the more you are borrowing, the more options you will have available to you, within reason. Bridging loans come with upfront costs to set up and generally, those up front costs are similar if you are lending £50,000 or £500,000; therefore Mortgage Lane will explore how to make your funding most cost economical.
Prominent lenders in the land bridging loan sector often establish a base level for loan amounts, usually beginning at around £50,000. This benchmark forms a part of their strategic lending criteria to reduce the low ticket assets on their book, generally if you are borrowing around the £50,000 mark, rates can be slightly more expensive, especially if you are also buying land!
Mortgage Lane is constantly matching borrowers with land bridging loan options that optimally suit their financial needs and investment plans, taking into account the diverse minimum loan sizes available in the market.
Yes, you can get a mortgage on a plot of land, but the process is not as straightforward as obtaining a standard residential mortgage. Most traditional lenders prefer properties that are already built and habitable, while a land mortgage is a specialist product designed for plots that are either undeveloped or earmarked for construction.
When Can You Get a Land Mortgage?
A land mortgage is easier to secure when the plot has full planning permission for development. Planning consent reassures lenders that the land has viable use and potential resale value, making it less risky to finance. Without planning permission, obtaining a mortgage on a plot of land becomes more challenging, and buyers often turn to a land bridging loan as a short-term solution. A mortgage for land usually requires a higher deposit compared to a standard residential mortgage. While buying a home might require only 10–20% deposit, land purchases generally need 30–50% deposit, depending on factors like location, planning status, and intended future use. If a land mortgage is not available or too slow to arrange, buyers often consider land bridging loans. A bridging loan for land can complete within 5–14 days and is commonly used for auction purchases or when the land is without planning permission. For those planning to build immediately, development finance can be arranged, which covers both the land purchase and up to 100% of construction costs, subject to lender requirements for Loan to Cost (LTC) and Gross Development Value (GDV). When applying for a mortgage on a plot of land, lenders will look closely at factors such as planning permission, the valuation of the land, and your overall exit strategy (e.g. developing, selling, or refinancing). Land located in high-demand areas or with strong development potential will usually receive more favourable lending terms.
When exploring the options for a land bridging loan, it’s important to recognise that there is generally no fixed minimum property value that applies universally. However, this criterion can vary considerably among different lenders in the land bridging loan market. Many of the foremost lenders in this area usually set a minimum property value threshold of £75,000 or higher.
The land bridging loan sector exhibits a wide range of criteria among lenders, including different minimum property values for considering loan applications.
Leading lenders in the land bridging loan field often establish a baseline property value, typically starting at around £75,000, as a part of their risk management and loan feasibility evaluations, some of which will have a minimum loan size of £50,000 and therefore the value returned by the valuer plays a big part in approving lending.
A land bridging loan is a type of short term finance that is particularly useful in property transactions. It’s designed to “bridge” the gap between a financial need and its future funding. This type of loan is especially beneficial in scenarios where quick funding is required for purchasing or developing land, before longer-term financing can be secured or the property is sold.
Key Features of Land Bridging Loans:
Short-Term Nature: Typically, these loans are for a short duration, ranging from a few months up to a couple of years.
Speed of Funding: One of the most significant advantages is the speed at which funds can be made available, often much faster than traditional bank loans.
Secured Loans: These loans are secured against property or land, which means the borrower must have some form of real estate asset to offer as collateral – this can be the purchase, or borrowers looking for to lend 100% of the purchase price they may offer other property as security such as their home or a buy to let.
Flexible Terms: Unlike traditional loans, land bridging loans offer more flexibility in terms of loan structure and repayment options.
Higher Interest Rates: Due to their short-term nature and higher risk, these loans generally carry higher interest rates compared to standard mortgages.
Property Development: Ideal for developers who need quick financing to start or complete a project.
Property Auctions: Useful for buyers who need immediate funds to complete a purchase at an auction.
Land Acquisition: Beneficial for those looking to quickly secure land for future development or investment.
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Land bridging lenders often operate on a non-status basis, focusing more on the specifics of the deal and the exit strategy rather than the applicant’s credit status. This means applicants with adverse credit will have greater flexibility and more options than with mortgage borrowing.
Non-Status Approach
In the context of land bridging loans, ‘non-status’ refers to the lender’s approach where the emphasis is less on the applicant’s credit history or financial status. Instead, the primary focus is on the value of the deal itself – the property or land involved – and the viability of the exit strategy, which is how the loan will be repaid, such as through the sale of the property or refinancing.
Land bridging loan lenders are primarily interested in the potential of the land or property transaction and how the loan will be repaid. This approach is beneficial for borrowers who may not have a strong credit history but possess a promising property deal.
Applicants with Adverse Credit
Similar to some mortgage lenders, land bridging loan lenders can accommodate applicants with adverse credit histories. This includes past missed payments, County Court Judgments (CCJs), defaults, or even an Individual Voluntary Arrangement (IVA).
Post-Bankruptcy Options
If you have been discharged from bankruptcy, your options with land bridging loan lenders tend to improve over time. Generally, the prospects are better after 3 years and continue to improve after 6 years, as this distance from bankruptcy indicates reduced risk to the lender. But we can get lending for applicants that have just been discharged also especially if the deal stacks up on a non-status basis.
If you are looking to buy land with adverse credit, we would love to help,
Specialist lenders in the land bridging loan sector frequently operate with a closed legal panel. This means they specify which solicitors are authorised to act on their behalf. When obtaining a land bridging loan, you will typically select from a list of solicitors who are approved to represent the lender and, in some cases, you as well.
Legal Representation in Land Bridging Loans
Joint Representation
Lenders offering land bridging loans allow for joint representation. This arrangement means that a solicitor from the lender’s closed panel can also represent your interests. This can streamline the legal process and potentially reduce legal costs.
Sole Representation
In contrast, some land bridging loan lenders prefer sole representation, where their chosen solicitor represents only their interests. In such scenarios, you have the option to engage your own solicitor, subject to certain eligibility criteria. This is particularly common when there are specific complexities or higher risks involved in the loan.
It’s important to be aware that with sole representation, you will be responsible for two sets of legal fees – one for your solicitor and another for the lender’s solicitor. This can significantly impact the overall cost of obtaining a land bridging loan.
For more information on legal panel for land bridging:
No, for a land bridging loan, your income will be considered differently compared to traditional loans. While having a reliable income source is beneficial, it’s important to note that land bridging loan lenders typically adopt a non-status approach. This means they focus more on the deal’s merits and the exit strategy rather than the borrower’s income or credit history.
However, if your planned exit strategy from the land bridging loan involves re-mortgaging, lenders will be interested in ensuring that you have sufficient income to transition successfully onto a re-mortgage. This is because the ability to secure a mortgage for the exit strategy directly impacts the feasibility and risk assessment of the land bridging loan.
Non-Status Lending Focus
Lenders are more concerned with the value of the land or property and the viability of your exit plan. This could involve selling the property or refinancing, and less emphasis is placed on your current income or credit status.
Exit Strategy
If re-mortgaging is your intended exit strategy, lenders will assess your income to ensure that you can obtain a mortgage in the future. This is a crucial part of the risk assessment for a land bridging loan. While non-status lenders may not heavily weigh your income for the initial loan approval, it becomes significant when your exit strategy involves transitioning to a traditional mortgage.
For further income related questions around your exit.
We arrange cost-effective Land Bridging loans for:
- Individuals
- Special Purchase Vehicles/Limited Companies
- Limited Liability Partnerships (LLP)
- Trading companies
- Charities
- On/Offshore Trusts
A land bridging loan, known for its short-term nature, differs from a traditional mortgage in several ways, including how interest is charged. In a land bridging loan, interest is typically charged on a monthly basis.
Depending on your eligibility, you may have the option to repay this interest monthly. However, if you don’t meet the criteria for monthly repayments, the interest on your land bridging loan might be calculated and deducted from the total loan amount at the outset.
An important feature to note is that if the interest is deducted upfront and you manage to exit the land bridging loan earlier than anticipated, you may be entitled to a refund for the portion of the interest that was not utilised.
Monthly Interest Charges
Land bridging loans generally charge interest each month, offering a different financial structure compared to annual mortgage interest rates.
Repayment Flexibility
You might have the option to pay the interest monthly if you’re eligible and have the affordability to do so; otherwise, the interest will be deducted from the initial loan amount.
Interest Refund on Early Exit
Should you exit the land bridging loan before the term ends and if the interest was deducted at the beginning, you could receive a refund for the unused interest.
This structure underscores the flexibility and adaptability of land bridging loans, making them a suitable option for various short term financing needs.
We are proud to share that we’ve successfully arranged a land bridging loan in as little as 4 days. The key factor enabling such rapid completion is the strength of the exit strategy, a crucial element in land bridging loan applications.
For a land bridging loan to be processed quickly, a clear and strong exit plan is essential, such as Sale or Remortgage.
With a Sale, these factors are usually assessed by a valuer to determine the potential success of the exit strategy – this is classed as a clear exit.
If remortgaging is the chosen exit strategy, the underwriting process will be more thorough. Factors like credit status, income, experience, stress testing, and an asset and liability review will be taken into account.
The speed of a land bridging loan application also hinges on the legal aspects.
The legal process is vital in determining the timeline for arranging a land bridging loan. If you’re aiming for a swift completion, it’s important to work with a broker who can guide you to a lender that doesn’t require extensive legal searches.
Indemnity Policies vs. Legal Searches
Some lenders are willing to accept an indemnity policy instead of conducting full legal searches. This approach can significantly expedite the loan arrangement process. Legal searches can take up to 6 weeks in some cases, which might not be feasible for purchases with a 28-day completion deadline, such as auction buys.
The longest loan term you can get for land depends on the type of finance you choose, as land mortgages and land bridging loans have very different structures and repayment timelines. Unlike standard residential mortgages, which can extend up to 25–35 years, loans for land are often shorter and tailored to specific purposes like holding, developing, or refinancing.
Land Mortgages
A land mortgage is the longest-term finance option available for purchasing land. Most lenders offer terms of 10 to 25 years, depending on the planning status, the borrower’s affordability, and the intended use of the land. Land with full planning permission is more likely to qualify for longer-term finance because the risk of the land being unprofitable is reduced.
Land Bridging Loans
A land bridging loan is a short-term option, typically lasting 1 to 36 months. Bridging loans are designed for speed and flexibility, making them ideal for auction land purchases, land without planning permission, or as a temporary solution while you arrange longer-term finance such as a land mortgage or development finance. If you’re buying land to build on, development finance is another short-term funding option. It usually runs for 6–36 months, covering both the land purchase and 100% of build costs, with repayment expected upon sale, refinance, or completion of the project.
Which Option Offers the Longest Term?
- For long-term land ownership, a land mortgage is the longest option, offering terms up to 25 years.
- If you only need temporary funding while securing planning permission or waiting for development approval, a land bridging loan or development finance is better, but terms are much shorter.
The best way to borrow money to buy land depends on factors such as planning permission, how quickly you need the funds, and your long-term intentions for the land. Unlike residential properties, land purchases often require specialist finance because most high-street lenders do not offer standard mortgages for undeveloped plots. The most common and effective options include land mortgages, land bridging loans, and development finance.
- Land Mortgages
A land mortgage is a long-term finance option best suited for plots with full planning permission. This type of loan typically offers lower interest rates compared to short-term products but comes with stricter criteria and a longer application process. You will usually need a deposit of 30–50% of the land’s value, and the lender will want proof of planning consent or a viable plan for the land’s use. - Land Bridging Loans
If speed is crucial—such as for land purchased at auction or plots without planning permission—a land bridging loan is often the best solution. These short-term loans, usually 1–36 months, can provide up to 65–70% loan-to-value (LTV), with the option to borrow more if additional security is provided (e.g., using your home as collateral). Land bridging loans are fast to arrange, often completing within 5–14 days, and are ideal for securing land while you arrange long-term finance or work to increase its value through planning gain. - Development Finance
For those planning to build on the land straight away, development finance can be the best route. This type of loan typically covers both the land purchase and up to 100% of construction costs, depending on the lender’s requirements for Loan to Cost (LTC) and Profit on Cost (POC). Development finance is often used as an exit strategy after a bridging loan for land, once planning permission is in place and the project is ready to begin. - Re-mortgaging Your Home or Using Equity
Some buyers choose to re-mortgage their home or take out a second charge mortgage to release equity for land purchases. This can be a cost-effective solution if you have significant equity and want to avoid short-term finance. However, this option is not ideal for time-sensitive deals like land auction purchases.
Which Option is Best?
- If you need funds fast or are buying land without planning permission, a land bridging loan is usually the best choice.
- If the land has full planning consent and you want long-term finance, a land mortgage will likely offer the most cost-effective rates.
- If your goal is construction, development finance is the most suitable.
Yes, you can get a bridging loan for land, and it is one of the most popular ways to finance land purchases when traditional mortgages are unsuitable or too slow. Land bridging loans are designed for short-term funding, typically lasting 1–36 months, and can be used for both land with planning permission and land without planning permission. They are particularly useful for auction purchases, where buyers must complete within 28 days, or when acting quickly is critical to secure a development opportunity.
Most land bridging loan lenders will offer up to 65% loan-to-value (LTV) of the land’s current market value. If full planning permission is in place, some lenders may extend this up to 70% LTV. For borrowers who can provide additional property as security, it is possible to access up to 100% of the purchase price, which can also allow funding for initial development costs.
A bridging loan for land is commonly used for several scenarios. These include buying land at auction, securing land while waiting for planning permission, site assembly, or bridging to development finance once the build project is ready to begin. It is also a valuable tool for land banking, enabling investors to hold onto land while its value appreciates.
The main advantage of a land bridging loan is speed. Funding can be released in 2–14 days, compared to the much longer timescales of traditional land mortgages. These loans are also highly flexible and allow borrowers to exit through refinancing onto a development loan, taking out a longer-term mortgage, or selling the land after planning consent or value improvements.
Yes, you can borrow money against your house to buy land by using your property as security. This can be achieved through options like a re-mortgage, a second charge mortgage, or a bridging loan for land. Many investors and self-builders leverage equity in their homes to secure land purchases, especially when buying land with or without planning permission or when aiming to fund development projects.
Using a Re-mortgage to Buy Land
A residential re-mortgage is one of the most cost-effective ways to raise capital against your home for a land purchase. By refinancing your existing mortgage, you can release equity to fund the deposit or even cover the full cost of the land. Standard mortgage rates are usually lower than those offered by land bridging loans, making this an attractive long-term solution. However, a re-mortgage can take several weeks to arrange, which may not be ideal for auction land purchases or time-sensitive acquisitions.
Second Charge Mortgages
If you don’t want to re-mortgage your entire home, a second charge mortgage can be taken against your existing property. This allows you to retain your current mortgage deal while borrowing an additional amount to buy land. This is particularly popular among borrowers who have a competitive fixed-rate mortgage they don’t want to exit early or pay penalties on.
Bridging Loans for Land Purchases
For buyers who need fast access to funds, such as for land auction finance, a bridging loan for land is often the best solution. A land bridging loan is a short-term facility, usually 1–36 months, allowing you to borrow against the equity in your house to purchase land. This type of finance is particularly useful for:
- Buying land without planning permission.
- Securing plots for self-build projects.
- Land banking or site assembly for future development.
- Bridging to development finance once planning consent is granted.
- Bridging loans are flexible and can be arranged within 5–14 days, making them suitable for time-critical land purchases. Lenders will usually provide up to 65–70% loan-to-value (LTV) of the land’s value, with the potential to increase borrowing if additional security (like your home) is offered.
Development Finance as a Next Step
If your plan is to build on the land, once purchased, you may refinance the land bridging loan with development finance. This type of finance covers both the land cost and up to 100% of the build costs, provided the deal meets lender criteria around Loan to Cost (LTC) and Profit on Cost (POC) percentages.
Things to Consider
- Risk: Borrowing against your home puts it at risk if the land or project doesn’t go as planned.
- Interest Rates: Bridging loan rates are higher than standard residential mortgage rates but offer greater speed and flexibility.
- Exit Strategy: Whether selling the land, refinancing with a land mortgage, or moving to development funding, a clear exit plan is essential.
- Planning Status: Land without planning permission is viewed as higher risk by lenders, which can affect the LTV or increase interest rates.
Serviced Interest or Deducted interest
In a serviced interest arrangement, the borrower pays the interest monthly, similar to a standard mortgage. This option can be beneficial if the borrower has a regular income stream and prefers to manage their cash flow by paying interest as they go. It helps in maintaining the principal amount of the loan, as the borrower is actively paying off the interest. Borrowers need to ensure they have the necessary cash flow to make these monthly interest payments. It’s essential to plan for these expenses to avoid financial strain.
In deducted or retained interest loans, the interest for the loan term is calculated upfront and deducted from the initial loan amount provided to the borrower. This approach is useful for borrowers who may not have a regular income stream during the term of the bridging loan, such as property developers awaiting sale or refinancing of a project. It eliminates the need for monthly interest payments, as the interest is already accounted for. Since the interest is deducted at the beginning, the initial cash received by the borrower is less than the total loan amount. Borrowers should plan accordingly, as they will have less capital available upfront for their project or investment. It should be noted that any interest unused will usually be repaid by the lender on exit.
Both options have their specific uses depending on the borrower’s financial situation, cash flow, and strategy for the loan. It’s crucial for borrowers to understand these differences and choose the option that best aligns with their financial plan and the intended use of the land bridging loan.
At Mortgage Lane, we are experts in providing land bridging loans for development projects. If your project is fully approved with planning permission, we can offer a development loan up to 75% Loan to Gross Development Value (LTGDV) which can be arranged after the bridging completes if you’ve been waiting on the planning consent.
LTGDV Explained
This is a critical metric in property development finance, especially relevant to land bridging loans. It determines the maximum loan amount we can provide, based on a percentage of the Gross Development Value of your project at completion.
Gross Development Value (GDV): The GDV represents the projected market value of your property or development post-completion of construction or renovation works.
75% LTGDV
In terms of a land bridging loan, we can lend up to 75% of your project’s estimated completed value. For example, if your development’s GDV is around £1,000,000, you could be eligible for a land bridging loan of up to £750,000 from Mortgage Lane.
With Planning Permission
Full planning permission indicates that your development project has been authorised by the local planning authority. This reduces risk for the lender, making it easier to secure a land bridging loan, as it assures that your project is legally compliant and ready to proceed.
Without Planning Permission
Lacking planning permission makes obtaining a land bridging loan more challenging. Unapproved land use or development plans increase lender risks. Without official sanction, the potential value and viability of the development are unpredictable, complicating our ability to finance it.
In conclusion, full planning permission is essential for securing a land bridging loan for your development finance. It legalises your project and clarifies the lending process, allowing us at Mortgage Lane to confidently invest in your development’s future value. Absence of planning permission, conversely, substantially restricts your financing options due to heightened risks.
If you’re looking for a refurbishment loan to exit development funding and have a history of adverse credit, lenders may inquire about your options for remortgaging. This is part of their assessment to understand your exit strategy for the loan, especially if the plan involves refinancing the property after refurbishment.
It is common for developers to run out of time on their development finance facility and might be looking for a “finish and exit” product, whilst these lenders are also happy with adverse credit for sale exits, they might not be so keen with adverse credit for remortgage exits. Finish and exit products are used for the remainder of the phase 2 works on a development, more information on this product can be found on our Development Exit page.
Developer exit products will fund up to 75%LTV against the value of the site, which in some cases could be 95% completed and therefore could be quite flexible.
Yes, first-time buyers can indeed access land bridging loans. In the land bridging loan market, lenders often adopt a non-status approach, which means they focus more on the details and potential of the deal itself rather than the applicant’s credit history or status.
Non-Status Lending Approach
This is particularly beneficial for first-time buyers who may not have an extensive credit history or previous property experience. Lenders evaluate the loan application based on the merits of the property deal and the feasibility of the exit strategy, rather than solely on the borrower’s financial history.
For first-time buyers, it’s crucial to present a strong case regarding the potential of the land or property and a clear, viable plan for how the loan will be repaid, such as through the sale of the property or obtaining a long-term mortgage, lenders may be concerned that the borrower may live there and that scenario will need to be covered off to give greater confidence to the underwriter.
This approach opens opportunities for first-time buyers who might not qualify for traditional property financing due to lack of experience, income or credit issues. It allows them to enter the property market through alternative financing routes.
As with any financial commitment, especially for first-time buyers, it’s important to seek advice and fully understand the terms of a land bridging loan.
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Yes. Many of our clients use Land Bridging Loans to purchase land from auction. It is good to instruct your broker immediately so you can establish which solicitor you may be dealing with. It is important to note that most short term lenders offering Auction Loans will have a closed legal panel and therefore your chosen solicitor may not be able to act. It is also best to check early on what searches will be required on completion, or if you can avoid them. If not, they could cause delays so it is best to get them started in advance of your bridging offer.
We assist our clients with Land Bridging loans in England, Wales, Scotland, and Northern Ireland.
Yes. Applicants can apply for a Land Bridging product before the auction, which means that your broker can start underwriting your case, instruct a valuation and request the legal requisition so you are aware of what items you will need to provide, way ahead of time. This can create good punctuality with the 28 days that you have to complete in a traditional auction. This will also give you the opportunity to have your solicitor advise you on the legal pack and to have enough time to choose the correct product.
When considering land bridging loans, particularly for auction purchases, it’s crucial to be aware that these loans are typically not protected by the Financial Services Compensation Scheme (FSCS). This lack of coverage applies unless the borrower intends to reside in the property. Therefore, borrowers using land bridging loans for investment purposes should be especially diligent in selecting a reputable lender.
Land bridging loans used for investment, as opposed to residential purposes, generally do not fall under the protection of the FSCS. This means that the safety net provided by the FSCS for other financial products may not be available.
Due to the absence of FSCS coverage, the importance of working with a credible and trustworthy lender cannot be overstated. It’s essential to ensure that the lender has a solid track record and a strong reputation in the market.
Borrowers should conduct thorough research and due diligence when selecting a lender for a land bridging loan. This includes checking the lender’s history, reading reviews, and possibly seeking recommendations from trusted financial advisors.
At Mortgage Lane, we prioritise the safety and satisfaction of our clients. We guide our borrowers in choosing reputable lenders for land bridging loans, providing them with the necessary information and support to make informed decisions. This approach is especially important in the auction loan market, where the right lender choice can significantly impact the success of your investment.
BLOGS ON LAND BRIDGING LOANS
At Mortgage Lane, we see the most complex of auction loan applications, some of which make a good read for investors looking to learn from other applicants challenges, or for those effected by the topics! See more refurbishment loan topics covered in our blog here.