Can I Get A Mortgage On Land? | Complete Guide

Over the years we have received many enquiries related such as can I get a mortgage on land, how to apply for a mortgage on a piece of land etc. So, in this article, we will try to answer all the questions when it comes to getting a mortgage on land in the UK. We will explain the different types of land loans available to an individual or business and what are the benefits of each type of loan.

What is Land Mortgage?

A land mortgage is a form of secured lending where you borrow money against your property. The lender takes possession of the property as security for repayment of the loan. In other words, if you default on the payment of the loan, the bank may sell the property at auction and use the proceeds to repay the loan. This is called foreclosure.

Types of Land Mortgages:

There are two main types of mortgages that one can avail from banks and financial institutions. They are:-

1) Conventional Loans

2) Non-Conventional Loans

The difference between these two types of loans is that conventional loans require a minimum down payment whereas non-conventional loans do not.

Can You Get a Mortgage On Land?

The answer is yes but due to a small number of lenders offering products for land mortgages, it isn’t as accessible as a traditional residential mortgage. You may be required to seek a lender in the specialist market as it isn’t easily available through the high street banks. There are many different reasons why someone might wish to apply for a mortgage for land. It could be for agricultural purposes or for development or perhaps for leisure activities. Buying land can be a great investment due to it’s scarcity but many lenders see it as a risky asset so there are not many lenders on the market offering this type of loan. Speaking to an advisor might be a good way to get started and be directed to lenders who are willing to offer mortgages for land. Read on for more information.

Post Topics

Land mortgage

Types of land mortgage

What do I need?

Next steps

FAQs

Land Mortgage

Getting a mortgage for land or land with property on can be more difficult when compared to a normal standard residential property as lenders see it as a higher risk and you will be required to provide an explanation for your intended use for the land. Approaching a specialist lender who is used to dealing with land mortgages and having a strong application will be valuable and increase your chances of finding a loan.

Types of land mortgage

The number of lender’s available to choose from and interest rates are determined by the type of land you wish to borrow on. Residential land to live on, commercial land to develop or to remortgageRefinancing an existing mortgage with a new mortgage. an existing land mortgage are the most common and a good selection of lenders offer this type of product with average to high interest rates depending on their lending criteria’s and requirements.

Brownfield land and agricultural or land for leisure are more difficult to source a lender for and can carry high-interest rates due to the lack of lenders in the market. Greenbelt land is extremely difficult and rare to find a lender who would provide a loan for and if offered would carry very high interest rates. This is due to the fact that greenbelt land are protected open spaces and prevented from being able to get planning permissionPermission granted by the local authority for a property to ... and altered.

Planning permission can be extremely beneficial when applying for a land mortgage. Lenders can see clearly the intended purpose of the plot of land and how you propose to use it. An Outline Planning Permission (OPP) is an initial agreement in principle provided by the Local Planning Authority which lasts for three years and summarises what can be done on the plot of land although this doesn’t provide authority for works to begin until a detailed application for Full Planning Permission (FPP) is granted. FPP provides detailed plans and specifications of the work required including plot, design and appearance. The latter is a more favourable type of planning permission to lenders when it comes to applying for a mortgage. Having full planning permission can increase the value of a plot of land and could increase your chances of being accepted for a mortgage.

What do I need?

Having a higher deposit is always better for any type of mortgage but whilst a standard residential mortgage may only require a 5% deposit, with land mortgages you may find that you will be required to have at least 20% – 30% deposit as a minimum. Being able to raise a higher deposit will lower your loan to valueThe ratio of the mortgage amount to the value of the propert... (LTV) ratio which may allow you to unlock more product choices and achieve better interest rates. If you currently own another property, it may be possible for you to leverage the property as an asset as part of your deposit.

As with any type of loan application, having a good credit score or credit history will improve your chances immensely as a lender will be more favourable to borrowers who have shown reliability with their past finances.

Next steps

If you are looking to secure a mortgage for land, get in touch today and one of our advisors will be happy to help. Speaking to a professional advisor can save you time and hassle and direct you to lenders suitable for your requirements and circumstances.

FAQs- 

Is it possible to get a loan on land in the UK?

Yes, it is possible to get a loan for land in the UK. Land loans are popular amongst people wanting to buy new homes, build extensions or even just renovate their current homes. There are many types of mortgages such as self-build mortgages, agricultural mortgages, commercial mortgages, bridging loans etc on land but you may need to contact a specialist mortgage broker for your mortgage application. 

What are self-build mortgages?

A self-build mortgage is the type of mortgage that facilities the purchase of both property and land. It allows the borrower to finance the construction costs of building a home themselves. Self-build mortgages are usually used by first-time buyers, young families and those who want to create their dream home. If you are interested in getting a mortgage on a piece of land, you can contact an expert broker who can help you to connect with a mortgage lender. 

What are commercial mortgages?

Commercial mortgages are similar to traditional mortgages which are available for businesses and organisations who wish to borrow money against their business assets. They are often used by companies wishing to expand their operations or buy additional premises. Commercial mortgages are also known as secured loans because they are secured against the collateral of the company’s assets. This means that if the company does not repay the loan, the lender has the right to seize the assets of the company.

What is the meaning of a woodland mortgage?

A woodland mortgage is a rare type of mortgage which enables individuals to purchase an area of woodland. It is similar to an agricultural mortgage where the individual purchases a plot of land and then builds a house on top of it. The difference between a woodland mortgage and an agricultural mortgage is that the former is generally purchased using a mortgage on agricultural land rather than being sold outright. A woodland mortgage on land is ideal for anyone who wants to make use of the benefits of owning woodland without actually having to live there. For example, someone could purchase a woodland mortgage so that they could enjoy the peace and tranquillity of nature while still benefiting from the tax advantages associated with owning a home.