Bridging Loans for Land in the UK
Freeing up capital or securing long-term financing can be time-consuming. Anyone that needs access to funds quickly could consider short-term bridging loans.
This article will explore using bridging loans to buy land in the UK.
We will take you through everything you need to know about land bridging loans, including;
- Exit Strategies
- Lenders & Rates
- Alternative Options
Our expert team at Loan Corp is on hand to help with any financial queries you may have. Keep reading to learn more about land bridging loan options and how we can help you find the best deals.
Are Land Bridging Loans Available for Buying Land in the UK?
It is possible to get a bridging loan in the UK to buy land for residential or commercial purposes.
All lenders consider the risk involved in any loan. Bridging loans are typically considered high-risk. Because of this, they can be challenging to get.
You will typically have to approach a specialist lender to get this type of loan. You must then meet strict eligibility criteria.
Bridging loans are short-term finance options that are issued quickly. Interest rates are typically higher than traditional finance options. This is because of the additional risk to lenders.
Land Bridging Loan Eligibility
Taking out a land bridge loan can help you secure property deals quickly. Because lenders consider these transactions high-risk, strict eligibility criteria must be met.
Meeting the criteria set by your lender significantly reduces the risk involved for them. Here are some examples of the criteria required to attain a land bridge loan.
Lenders typically require a large deposit for a land bridge loan. This helps to minimise the risk involved for them.
The typical LTV (loan to value) ratio for land bridging loans is from 60% to 70%. The loan to value describes the amount the lender is willing to loan compared to the deposit required.
In this case, a deposit of 30% to 40% would be required. This LTV ratio is most commonly reserved for deals where planning permission has already been obtained.
Applying for a land bridge loan with no planning permission will typically see LTV offers of around 50%.
Deposits can be cash or eligible assets. Assets such as other properties can be used as security when applying for a loan.
Bridge loans are short-term loans. Your lender will need to know how you plan to pay this back in the period agreed.
Your exit plan should also include a backup to give the lender greater peace of mind.
Your exit strategy should help to reduce the potential risk for the lender.
Keep reading this article for a range of potential exit strategies to help you repay the loan.
Your credit history will be important for all types of lending. Your credit history will be checked if you are applying for a mortgage, loan, or development finance.
This is another part of the risk assessment carried out by the lender. All applications will be considered. However, having a good credit history will typically improve your chances.
Good credit histories show the borrower as being responsible. It is evident that you have been able to pay back any loans or credit without any problems.
Evidence of successful experience in the industry can also help a land-bridging loan application.
While industry experience is not always a requirement, it can be beneficial. A good credit score can show you as a low-risk applicant.
Having examples of successful experiences in the industry will minimise your risk factor. It will show that you have the ability and contacts to be successful in achieving a greater post-development value.
Planning Permission on Land
Existing planning permission on developments is beneficial.
You may need to apply for planning consent if existing planning permission doesn’t exist for the land.
Planning permission can reduce the risk for the lender in land purchases. Planning permission can also increase the LTV ratio, reducing the required deposit.
Applying for Land Bridging Finance in the UK
Securing bridging finance is much more likely if you prepare correctly.
Applying for a land bridging loan can be more difficult than more typical forms of finance. This is because it is seen as a greater risk to the lender.
Taking the time to read through the requirements we have listed above can help to ensure you are fully prepared.
When applying for land bridging finance, the following steps can greatly improve your chances of being accepted.
Step 1 – A Clear and Established Exit Strategy
Your exit strategy is integral to the acceptance of land-bridging finance applications.
Lenders need to minimise the risk of lending to borrowers. A defined exit strategy will detail exactly how the money will be paid back.
An exit strategy should never put all of your eggs in one basket. A backup to your exit strategy can be just as important.
Step 2 – Prepare Your Paperwork Prior to Land-Bridging Finance Applications
A bridging loan can quickly facilitate land purchases. Ensuring all of your paperwork is in order before making your application can minimise the risk of delays.
Details on planning permission and potential land use are essential. You should also detail the current use of the land and include valuation reports.
Step 3 – Work with a Broker
Bridging finance can be a relatively expensive option. Finding the most competitive rates will help you to save a considerable amount of money.
Working with a broker will be beneficial. They will help with your application and find the best prices.
Specialist brokers will know the best lenders to approach after reviewing your circumstances.
Some specialist lenders only work through referrals from brokers. Loan Corp can help you find the best lenders and negotiate competitive rates.
Potential Exit Strategies
Lenders want to minimise their potential risk as much as possible. This is why it is so important to have a clear exit strategy.
Your exit strategy will deliver a clear path to settling the debt. Potential exit strategies for bridging finance include;
- Obtaining planning permission and then selling the land.
- Obtaining development finance for a project. This can then be used to pay off a bridging loan.
- Obtaining a mortgage or other long-term financial solution to refinance the bridging loan.
- Using another bridging loan to refinance land purchases.
Speaking with your broker to determine the suitability of your exit strategy is advised. You should also ensure you have a backup plan in case the original strategy fails.
Lenders & Rates
There is a good selection of companies in the UK that offer commercial bridging loans for land.
Working with brokers like Loan Corp lets you take advantage of their industry experience. They have a great understanding of the companies that are best suited to your circumstances.
Some UK companies that consider land bridging loans include;
- Shawbrook Bank
- KIS Bridging Loans
- MT Finance
Interest rates will vary depending on the lender, the amount being borrowed, and your circumstances.
Interest rates will be lower on land where planning permission has already been granted. Interest rates are typically around 0.9%.
If the land does not have planning permission, you could expect interest rates to be around 1.25% to 1.5%.
Speaking with our expert advisors will help you find the best lenders on the market. We will then be able to negotiate rates to find you the best deals.
A bridging loan calculator will help you calculate the total loan cost.
You will be able to enter the amount you wish to borrow and the property value. The term length and interest rate will then determine what will be paid over the agreed terms.
Land Bridging Alternatives
Applying for bridging finance for land can be an excellent short-term option. A short-term loan like this can be secured in just a couple of weeks. However, there may be more suitable options if you aren’t in a rush.
Some alternatives will help you purchase land. While a short-term loan can be beneficial for fast-moving deals, it can lead to high interest rates.
Other land-purchase finance options include;
Remortgaging Existing Assets
Existing assets can be used as a deposit for land-bridging finance options. Alternatively, you may consider remortgaging the property to release equity. This will allow you to purchase the land without a bridging loan.
Remortgaging is seen as a risky strategy. This is because you are putting the property on the line. Should you fail to keep up with repayments, you could lose it.
Long-term options include commercial mortgages. A commercial mortgage would be secured against the land and offer a significantly longer term than bridging finance.
Bridging loans typically won’t exceed three years. A commercial mortgage will typically have a minimum term of 15 years.
Commercial mortgage rates are typically higher than residential options. This is because of the risk associated with commercial developments.
Land finance for larger-scale developments is also an option. These short-term deals are available on interest-only terms. Interest rates are typically high because they are seen as a risk to lenders.
Funds won’t be released as a lump sum. Instead, it will be released in stages.
Loan Corp bridging loan services
Loan Corp offers a wide range of tailored financial services. We cater to commercial and domestic needs to make things easy for you.
By working to your specific needs, we ensure we find the best deals completed quickly.
We work with more than 200 lenders across the UK to bring you a great choice of services.
Our team of expert brokers has decades of experience. Our state-of-the-art systems also help us process applications quickly and easily.
We work with more than 100 bridging loan lenders for short-term lending needs. Approvals are available within 24 hours in some cases. The entire process can even be completed within a week.
Our experts will compile expert advice for you to browse before deciding. Discover more about bridging loan criteria to see if you qualify.
Alternatively, fill out our application form below, and we will get back to you as soon as possible. Provide us with a description explaining your needs, and our experts will be able to talk you through your options.
Can anyone apply for land bridging finance?
Anyone whose assets are located in the UK will typically be eligible to apply for land bridge loans.
Many lenders will also consider foreign nationals as well as applicants from the UK.
How long does bridging finance last?
Bridging finance for land purchases is designed to be a short-term solution. Depending on your needs, they can last anywhere from a couple of days up to 36 months.
How long does a land bridge loan take to go through?
A land bridge loan at Loan corp can be accepted in as little as 24 hours. In some cases, the entire process can be expedited to just 48 hours.
More typically, applications can be completed within 3 weeks.
What documents are required for a land bridge loan?
Land bridging finance requires the following documentation;
- Personal Identification
- Address Confirmation
- Evidence of Assets & Liabilities
- Three Months of Bank Statements
If you work with a broker, they will help you get the correct documentation in place for applications.
Land bridging finance can be an excellent option for buying land.
This short-term land loan offers a great way to get funds quickly. Our team of experts works with a range of excellent lenders that can help you secure your short-term loan.
This can be an excellent option for commercial property developers. Land with development potential can often move quickly. Having an option that frees up cash can be beneficial.
Most lenders look at applicants on a case-by-case basis. Our team of experts can help with the application process, advise on potential lenders, and negotiate deals.