Head of Content
Mortgage Advisor & Director
Can I get a mortgage to buy land with planning permission?
Getting a mortgage to buy land can be complex due to the lack of mainstream lenders.
While land finance does exist, it is commonly through specialist mortgage lenders. Teito is a whole-of-market broker which means we have access to deals that are not accessible to the general public, including mortgages for land with planning permission.
Whether you are hoping to build your dream home or to develop and sell on, Teito can help.
What type of land can I buy?
The rates and access to finance will depend on the type of land you are looking to buy.
Land is a valuable asset, and the right kind of land for development is in short supply. Assuming you are looking to build on your plot, having the right planning permission organised will be a key consideration. The type of land will dictate the likelihood of planning permission being granted, with rates and access to finance varying accordingly.
The table below describes the type of land alongside the number of lenders and interest rates possible.
| Type of Land | Mortgage Lenders? | Typical rates |
|---|---|---|
| Residential plot (to live) | Yes | Average/high |
| Commercial plot (develop) | Yes | Average/high |
| Brownfield land | Uncommon | High |
| Greenbelt land | Rare | Very High |
| Agricultural or leisure | Uncommon | High |
| Refinancing land | Yes | Average/high |
What is the difference between full and outline planning permission?
If the plot you are looking to buy has been granted full planning permission, the local authority will have detailed plans for the land. You must understand the nature of the consent that has been permitted; your lenders will also need to see these plans to inform their decision. Outline planning permission, by comparison, will provide an indicative idea of the type of project that may be permitted in the future; however, does not include detailed plans.
While it is easier to get a mortgage if the plot has full planning permission secured, some lenders will lend based on outline permission only. Get in touch today, and our advisors can help.
How much deposit will I need for a land mortgage?
The deposit you can expect to pay will take into account several factors, including the plans for the plot, your credit history, age and other eligibility criteria. If you are buying at an auction, you can anticipate paying a 10% deposit on the day, with the rest due within 28 days.
Typically, deposits to purchase land are higher; you can expect to pay a 30% deposit on land investments compared to 15% on a house.
What about land mortgage rates?
You will find that land mortgage rates are generally higher, ranging from 3% to 4.5%.
Land mortgages are also considerably shorter than residential mortgages and usually do not exceed five years.
- The rates you will realise are affected by various factors, including:
- The location of the land
- The lender
- The Loan to Value ratio
- The value of the loan
- Whether the land has full or outline planning permission
- Your credit report
Mortgaging to fund a self-build house
You will need to apply for a self-build mortgage to buy land and build a house.
Lenders will look for a detailed financial plan to support your application. This will include a projection of costs with details on the type of property you hope to build. The more complete your submission, the more likely it is to be successful.
The funds are delivered in stages to align with the build, which means you receive the cash when you need it.
There are a few perks to a self-build project:
- Build your dream home - this is your opportunity to build precisely what you want, subject to planning restrictions
- Avoid stamp duty - you are likely to be able to buy a plot under the stamp duty threshold of £125,000.
- Equity - once built, it is likely the house will be more valuable than the build and land cost combined, meaning you will have increased your equity.
Once the build is complete, we would highly recommend remortgaging as you will be able to secure a better deal with lower rates in comparison to the financing you used to build.
Self-build mortgage products are a specialist type of finance, and it is advised you engage with an experienced broker to make sure you get the best deal. Complete our online form to get started!
Don't forget about land mortgage fees
As with a residential mortgage, there are fees to take into account when buying a plot of land. These cover application fees paid to the lender, valuation fees to a qualified surveyor and legal fees to the conveyancer.
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Will I need a commercial mortgage to buy land?
Whether or not you will need a commercial mortgage depends on the purpose of the land; if the land is acquired for commercial property development, then yes. Note that the rates you can expect to achieve on a commercial land mortgage will be higher than if you were buying commercial property and the LTV is generally around the 50% mark.
How can I learn more?
If you are ready to get started, complete our simple online form and one of our brokers will be in touch!
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Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.