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.

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.

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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.

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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.

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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, for more information GET IN TOUCH.

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.

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We assist our clients with Land Bridging loans in England, Wales, Scotland, and Northern Ireland.

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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.

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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.

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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 GET IN TOUCH

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 GET IN TOUCH.

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.

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We arrange cost-effective Land Bridging loans for:

• Individuals
• Special Purchase Vehicles/Limited Companies
• Limited Liability Partnerships (LLP)
• Trading companies
• Charities
• On/Offshore Trusts

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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.

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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.

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