Bridging Loans for Land
When you’ve spotted the ideal plot of land with the right planning permission, quick action is often needed.
Bridging loans for land that has planning permission offer a rapid and adaptable financing solution, helping you capitalise on opportunities in the competitive UK property market.
Land bridging loans are available from £500,000 and up to 60% loan to value.
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What are Bridging Loans for Land?
These short-term loans enable buyers to swiftly secure land that’s ready for development.
They cover the financial gap between land acquisition and either property sale or arrangement of development financing.
Like most bridging loans, these can be secured within days, as long as the right planning consent is in place.
This rapid turnaround is ideal for land auctions or when facing stiff competition for prime plots.
Lenders view land with approved planning as lower risk, leading to more attractive terms compared to loans for land without permission.
Land bridging loans are secured against the land itself or other valuable assets, offering a degree of flexibility that’s particularly appealing in the property market.
Advantages of Bridging Loans for Land with Planning Permission
Swift Fund Access
In a market where coveted land sells quickly, rapid access to finance can be the key to securing profitable opportunities.
Adaptable Repayment Options
You can often opt to ‘roll up’ the interest, paying it with the principal at the end of the term. This can be beneficial if you plan to sell the developed property to repay the loan.
Enhanced Loan-to-Value Ratios
Land with planning permission often qualifies for higher loan-to-value (LTV) ratios compared to undeveloped land, potentially reducing your upfront capital requirements.
Prime Land Acquisition
With a bridging loan in place, you’re well-positioned to act decisively when exceptional land becomes available, giving you a competitive edge in securing the best plots.
Flexible Uses
We can assist property developers and investors for land purchases, land banking and land development.
Bridging Loan Criteria
At Bridging Finance London, we offer a wide choice of lenders and bespoke solutions for high-value land purchases.
- Min Loan: £500,000
- Max Loan: £100 million
- Maximum Loan-to-Value (LTV): 60%
- Age Requirements: 18-85 years
- Loan Term: 3-36 months
- All asset classes considered
Eligibility
We specialise in connecting a diverse range of clients with suitable lenders for land bridging loans.
Our extensive network of trusted lenders caters to individual investors, limited companies, partnerships, and offshore entities.
As experienced brokers, we understand that each application is unique and requires a tailored approach.
When assessing your eligibility for a land bridging loan, lenders consider:
Land Value and Suitability: The property’s market value and development potential are crucial factors in determining loan amounts and terms.
Exit Strategy: Lenders require a clear, realistic plan for loan repayment. Whether it’s property sale, refinancing, or other methods, we’ll assist you in articulating a compelling exit strategy.
Experience: While not always mandatory, your track record in land acquisition or development can strengthen your application.
Planning Permission: Having approved planning permission will significantly enhance your eligibility and potentially lead to more favourable terms.
Credit Profile: Lenders review credit history, but we work with institutions that understand past events don’t always reflect current circumstances.
Lenders don’t typically require proof of income for land bridging loans, as the land itself serves as security, sometimes supplemented by other valuable assets.
Who Would Use These Loans?
Bridging loans for land that has planning permission can be used by a diverse range of property professionals and enthusiasts.
These flexible loans are designed to meet the unique needs of different stakeholders in the property market, enabling them to act swiftly and decisively.
Property Developers
For property developers, these loans are a game-changer.
They provide the agility to quickly secure land with approved planning, potentially leading to faster project commencement and returns on investment.
This speed is crucial in competitive markets where prime development opportunities are scarce.
By using bridging finance, developers can move quickly to acquire land and bare land, begin construction sooner, and potentially complete projects ahead of market shifts, maximising profitability.
Investors
Those looking to expand property portfolios can use these loans to swiftly acquire land assets, capitalising on market opportunities.
Bridging loans allow investors to act decisively when lucrative land deals arise, even if their capital is tied up in other investments.
This flexibility can be particularly valuable in fast-moving markets or when unique opportunities present themselves, such as land auctions or distressed sales.
Self-Build Enthusiasts
Individuals planning to construct their ideal home can use these loans to purchase land, filling the gap until they’re ready to transition to a self-build mortgage.
For many self-builders, finding and securing the perfect plot of land is a crucial first step. Bridging loans provide the means to act quickly when the right opportunity arises, without having to wait for traditional mortgage approval. This can be particularly beneficial in areas where suitable plots are in high demand.
Once the land is secured, self-builders can take the time to finalise their construction plans and arrange a self-build mortgage, all while knowing their dream plot is already theirs.
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Planning Permission for Land Explained
Planning permission is a critical factor in land development and significantly impacts both the value of the land and its appeal to lenders.
Understanding the planning process and its implications is important for anyone considering a land purchase or development project.
Pre-planning Considerations
Before applying for formal planning permission, it’s wise to engage in pre-planning discussions with local authorities.
This preliminary step can provide valuable insights into:
- The likelihood of gaining approval
- Potential challenges or restrictions
- Local development priorities and policies
These discussions can save time and resources by highlighting any major obstacles before committing to a full application.
Types of Sites and Planning Permission
Different types of sites come with varying planning considerations:
Greenfield Sites: These are undeveloped lands, often in rural areas. They face more stringent planning restrictions due to environmental and agricultural considerations.
Brownfield Sites: Previously developed land, often in urban areas. These sites are generally favoured for redevelopment and may face fewer planning hurdles.
Infill Sites: Small plots within existing developed areas. While often easier to gain planning for, they may have specific local restrictions.
Planning permission itself comes in several forms:
Outline Planning Permission: This establishes the principle of development without approving specific details. It’s useful for assessing a site’s potential before committing to detailed plans.
Full Planning Permission: This approves all aspects of the development, including design details and materials.
Permission in Principle: A newer form of consent for housing-led development, separating the consideration of matters of principle from technical details.
Importance of Planning Permission
Planning permission is important for several reasons:
- Legal Compliance: It ensures the proposed development adheres to local and national planning policies.
- Community Impact: It considers the effect of the development on the local area and community.
- Environmental Factors: It addresses environmental concerns and sustainability issues.
- Infrastructure Requirements: It assesses the need for additional infrastructure to support the development.
Impact on Land Value and Lending Risk
Planning permission significantly affects both land value and the perceived risk for lenders:
Value Enhancement: Land with planning permission is worth substantially more than land without. The increase can be dramatic, sometimes multiplying the land’s value several times over.
Reduced Uncertainty: Approved planning reduces uncertainty about the land’s future use, making it more attractive to both buyers and lenders.
Lower Lending Risk: Lenders view land with planning permission as lower risk.
This often translates to:
- Higher loan-to-value ratios
- More competitive interest rates
- Increased willingness to lend
Marketability: Land with planning is generally easier to sell, providing lenders with more confidence in the exit strategy for bridging loans.
Future Potential: Even if the current planning permission isn’t ideal, its existence demonstrates development potential, which can be valuable for future applications.
The Application Process
When applying for bridging finance to purchase land, you will need the following, in addition to the main loan application information.
It’s important to note that specific requirements will vary between lenders, so it’s advisable to check with us first for the exact criteria.
Full Planning Permission
The most important requirement is a valid, full planning permission granted by the local planning authority. This should be:
- Current and not expired
- Detailed, covering all aspects of the proposed development
- Free from onerous conditions that might hinder development
Outline planning permission may be acceptable to some lenders, but full permission is preferred.
Planning Documentation
The borrower should have ready access to:
- The official planning permission document
- Approved plans and drawings
- Any supporting documents submitted with the application
- Details of any conditions attached to the permission
Site Ownership or Purchase Agreement
The borrower must either:
- Own the land outright, with proof of ownership
- Have a legally binding agreement to purchase the land
Land Registry Details Up-to-date
Land Registry documents, including:
- Title deeds
- Title plan showing the exact boundaries of the land
Site Plans and Surveys
Detailed site plans and recent surveys, which may include:
- Topographical surveys
- Geological surveys (if required)
- Environmental surveys (if applicable)
Proposed Development Details
A clear outline of the proposed development, including:
- Architectural plans
- Project timelines
- Cost breakdowns
Exit Strategy
A well-defined exit strategy, typically involving:
- Plans for selling the developed property
- Refinancing options
- Projected timelines for completion and exit
Financial Information
The borrower should be prepared to provide:
- Proof of funds for the deposit
- Evidence of ability to service the loan (if interest is not rolled up)
- Details of assets that could serve as additional security
Valuation Report
An up-to-date professional valuation of the land, taking into account the planning permission.
Exit Strategies
The exit strategy is ‘how’ you intend on repaying the lender.
It’s a considered method with a strategy, that has timelines and contingencies.
A clear, viable exit strategy is needed when taking out any type of bridging loan.
Lenders always scrutinise your exit plan closely, as it’s key to ensuring the loan’s repayment.
Let’s explore the main exit strategies borrowers typically employ when purchasing land. Not all land is developed, and not all developments require funding for the works.
These stages necessarily affect how and when you ‘exit’.
Selling the Land at a Profit
In some cases, borrowers enhance the land’s value and sell it without fully developing the site.
This might involve obtaining or enhancing planning permission or making minimal improvements to increase marketability. Success depends on market demand for development land in the area and the potential for quick turnaround to meet loan repayment deadlines.
Refinancing with Another Bridging Loan
If the initial development timeline extends beyond the original loan term, refinancing with another bridging loan might be necessary. Or you could see if the current lender will grant an extension.
This provides additional time to complete the project or secure a sale but can be costlier due to arrangement fees and potentially higher interest rates.
Development Loan as an Exit Strategy
Transitioning from a bridging loan to a development loan is an effective strategy, particularly for larger or more complex projects.
This approach involves first using the bridging loan to secure the land and initiate planning, then switching to a development loan to fund the construction phase.
Development loans typically offer lower interest rates and staged drawdowns aligning with construction phases. However, they require detailed development plans and costings, and lenders will assess the viability of the entire project.
Sale of Developed Property
Many borrowers plan to develop the land and sell the resulting property to repay the loan.
This strategy involves completing the development within the loan term, marketing the property effectively, and using sale proceeds to repay the bridging loan.
However, market conditions can impact sale speed and price, and development delays may affect loan repayment timing. It’s crucial to ensure the projected sale price comfortably covers the loan and interest.
Refinancing to Long-Term Mortgage
Once development is complete refinancing to a long-term mortgage can be a suitable exit plan.
This approach involves transitioning from short-term to long-term finance, using the increased value of the developed property to secure better terms. It’s important to start the refinancing process well before the bridging loan term ends and ensure the development meets lender criteria for long-term mortgages.
We can assist with long-term commercial mortgages and semi-commercial mortgages.
Using Funds from Other Sources
Some borrowers plan to repay the loan using funds from other sources, such as the sale of other property assets, investment returns, or expected windfalls.
It’s essential to ensure the alternative funding source is reliable and timely, and to have a backup plan in case the expected funds don’t materialise.
When choosing an exit strategy, it’s important to have a primary plan and at least one backup strategy, consider market conditions and potential changes, and ensure the chosen strategy aligns with your overall investment goals.
Always communicate clearly with your lender about your intentions and any changes to your plan.
A well-thought-out exit not only increases your chances of loan approval but also helps manage the risks associated with short-term, high-interest bridging finance. Professional advice is invaluable in ensuring your exit strategy is robust and achievable within your loan’s timeframe.
Need some help?
If you need a short-term bridging loan then a specialist broker is a good place to start. You will get expert help and advice along with a wide range of lenders to choose from.
To speak with a specialist broker, please call us on 020 3488 5706.
