Bridging Loan To Buy Land

Looking for a bridging loan to finance a land purchase?

We can provide

• Market leading bridging loans from £50,000 to £100m
• Rates from 0.5% pm
• Lower rates for £1 million+ loans
• Terms from 3 months to 3 years
• LTVs up to 80% (can be more if other assets in the background)
• Interest roll up options
• Residential (On a regulated basis), buy to let, HMO, investment and commercial properties considered
• Bridging finance for business purposes (purchasing land or new premises, deposit for new purchase, business growth)
• We provide a friendly, professional service to help you get the money you need at the best available rates

Each of these finance sources has their own niche, and through our market knowledge we can deliver enhanced, bespoke or exclusive terms based on your requirements.  

Call us on 0117 959 5094 to discuss your requirements.

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How Do Bridging Loans Work for Buying Land?

Bridging loans are a type of short-term, asset-backed financing that can provide fast access to capital. They are typically used to "bridge the gap" between a land or property purchase and a more long-term mortgage or sale.

When it comes to buying land, bridging loans offer several key benefits:

• Fast Access to Funds: Bridging lenders can often provide funds within 5-7 working days in some cases, allowing you to move quickly on a land deal, even at auction where you may need to complete within 28 days.
• Flexible Eligibility Criteria: Bridging loans are assessed primarily on the value and suitability of the land as security, rather than your personal income or credit history. This makes them accessible even if you don't qualify for a traditional mortgage.
• Interest-Only Repayments: With a bridging loan, you only pay the monthly interest during the loan term. The full loan amount is then repaid in one lump sum when you sell the land or secure long-term refinancing.
• Higher Loan Amounts: Bridging lenders can typically provide much larger loan amounts than a mortgage - often up to 80% of the land's value, or even more if you have additional valuable assets to use as security.

Exit Strategy: Planning for Repayment

A well-defined exit strategy is crucial when applying for a bridging loan to purchase land. Lenders will want to know exactly how you plan to repay the loan, which is typically through the sale of the land once property has been developed, or refinancing to a long-term mortgage.

Having a clear exit strategy demonstrates to the lender that you have a viable plan to repay the loan within the agreed term, which is usually 12 months. This helps to mitigate the perceived risk and can result in more favourable loan terms.

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Types of Land Suitable for Bridging Finance

Bridging loans in the UK can be used to finance the purchase of a wide range of land types, including:

• Residential Land: This could be a plot of land for a new-build home, or land with an existing property that requires renovation or redevelopment.
• Commercial Land: Land suitable for commercial development, such as retail, office or industrial units.
• Agricultural Land: Farmland or other rural land parcels, which may have potential for diversification or conversion to other uses.
• Development Land: Plots with (or awaiting) planning permission for residential, commercial or mixed-use developments.

Risk Considerations for Land Bridging Loans

Bridging loans for land purchases do carry some inherent risks, particularly for land without planning permission in place. Lenders will carefully assess the potential development prospects and marketability of the land when determining the loan amount and interest rate.

Factors that can influence the perceived risk, and therefore the loan terms, include:

• The type of land (e.g. residential, commercial, agricultural, development)
• Whether planning permission has been obtained
• The condition and location of the land
• Your experience in land acquisition and development
• Your exit strategy and ability to repay the loan

Lenders may require a higher deposit or charge higher interest rates for land they consider to be higher risk. It's important to work closely with your bridging loan advisor to understand how these risk factors could affect your borrowing options.

Related: How much does a bridging loan cost?

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Common Reasons to Use a Bridging Loan for Land Purchases

There are several scenarios where a bridging loan can be the ideal solution for purchasing land in the UK:

• Buying at Auction: When purchasing land at auction, you typically need to complete the sale within 28 days. A bridging loan can provide the fast funding you need to secure the winning bid, without having to rush the sale of your existing property.
• Seizing an Opportunity: If you spot a great land deal but need to move quickly to beat the competition, a bridging loan can give you the purchasing power to secure the site before others.
• Refurbishing & Developing: If the land requires significant work before it can be developed, a bridging loan can finance the purchase and any necessary renovations. You can then refinance to a long-term mortgage once the work is complete.
• Business Expansion: Businesses looking to expand their premises or acquire new land for development purposes can use a bridging loan to fund the purchase quickly, rather than waiting for traditional business finance.

Understanding Loan-to-Value (LTV) Ratios

When applying for a bridging loan to buy land, the lender will assess the Loan-to-Value (LTV) ratio - the amount you're borrowing compared to the value of the land.

Bridging lenders in the UK typically offer LTVs up to 80% of the land's value. However, if you have additional valuable assets, such as other property or investments, you may be able to secure a higher LTV of up to 100%.

A lower LTV is generally seen as lower risk by the lender, which can result in more competitive interest rates. Conversely, a higher LTV may attract higher rates to compensate for the increased risk.

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Interest Rate Variations for Land Bridging Loans

Bridging loan interest rates in the UK can vary depending on the specific circumstances of the land purchase.

• Land with Planning Permission: Bridging loans for land with full planning consent in place often start from around 0.43% per month.
• Land Without Planning Permission: Bridging loans for land without planning permission may attract higher rates, typically in the range of 0.5% to 0.7% per month, to reflect the increased risk.
• Additional Security: If you can offer additional valuable assets as security, such as other property or investments, you may be able to secure a lower rate, even for land without planning permission.
• Loan Amount: Larger loan amounts (£1 million+) often qualify for more competitive rates, as low as 0.43% per month.

Eligibility Criteria for Land Bridging Loans

Bridging loans in the UK are available to a wide range of borrowers:

• Individuals
• Limited companies
• Partnerships
• Offshore companies

The key eligibility criteria that lenders will assess include:

• The value and suitability of the land as security for the loan
• Your exit strategy for repaying the bridging loan
• Your experience in land acquisition and/or development
• The presence (or absence) of planning permission for the land
• Your credit history and any adverse credit events

Lenders will typically not require proof of income, as the loan is secured against the land or other valuable assets. However, your credit profile and the perceived risk of the land purchase will influence the interest rate and other loan terms you're offered.

Get the Best Rates on a Bridging Loan for Buying Land

Navigating the bridging loan market can be complex, with a wide range of lenders offering different rates and criteria. That's where the experts at Clifton Private Finance can help.

As whole-of-market brokers, we have access to competitive bridging loan deals from across the UK lending landscape. We'll work closely with you to understand your specific requirements and find the most suitable bridging finance solution - whether that's for a residential, commercial or development land purchase.

We can help you:

• Decide if a bridging loan is right for you
• Understand what type of loan best suits your situation
• Feel comfortable with how the process works and what the costs will be

And when we've established the best type of bridging finance for you, we will:

• Compare rates across the entire market
• Negotiate the best deal for your circumstances
• Guide you through the application process
• Help you arrange your valuation(s)
• Liaise with your solicitor to sort the paperwork
• Chase through your application until the funds are in your bank account

So, if you're looking to buy land and need fast, flexible funding, get in touch with our team today on 0203 900 4322 to discuss your options.

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FAQs

Can I use a bridging loan to buy land at auction in the UK?

Yes, bridging loans are frequently used to finance land purchases at UK property auctions. The speed and flexibility of bridging finance can allow you to act quickly and secure the winning bid, with funds typically available within 5-7 working days.

What types of land can I buy with a bridging loan in the UK?

Bridging loans can be used to purchase a wide range of land in the UK, including residential, commercial, and agricultural and development plots. The lender will primarily assess the value and suitability of the land as security for the loan.

Do I need planning permission to get a bridging loan for land in the UK?

No, you don't necessarily need planning permission in place to qualify for a bridging loan in the UK. However, lenders will consider the potential development prospects of the land when assessing the application, and land without planning consent may be deemed higher risk.

How much can I borrow with a bridging loan for land in the UK?

Bridging lenders in the UK can typically provide loan amounts of up to 80% of the land's value, and potentially more if you have additional assets that can be used as security. The exact amount will depend on your individual circumstances and the lender's criteria.

How long do bridging loans for land last in the UK?

Bridging loan terms in the UK typically range from 3 months up to 3 years. This provides flexibility to give you time to arrange longer-term refinancing or complete your development plans.

What's the interest rate on a bridging loan for land in the UK?

Bridging loan interest rates in the UK can vary, but often start from around 0.5%+ per month for land with planning permission.