Bridging loans, also known as bridging finance is a type of short-term finance used to purchase or refinance land, quickly. There are a variety of uses for this type of finance against land, such as bridging whilst planning permission is obtained or purely to release funds quickly.
The purchase of a piece of land, with the intention of applying for planning permission, would be ideal for a bridging loan. Once planning permission is granted, you would then refinance to development finance, to allow you to proceed with the build.
There are many reasons why people choose to take out this type of borrowing. Some of the more common reasons are as follows:
If the loan is for land acquisition and none of the legal work has begun, 14 days is realistic. If you are looking to release equity from land and a valuation is needed, you could expect funds within seven days of full lender application.
If the land has the relevant planning permission to build on and the location is deemed to be good you could expect to pay a rate of around 0.95% per month.
If the land has no planning and the location is less desirable, 1.25%-1.5% per month is realistic.
We can fund loans between £25,000, with no maximum loan size.
We can bridge against land at up to 65% loan to value (LTV), and will even lend up to 100% LTV with additional security.
The amount you can borrow will depend on the value of the security offered. If you’re looking to maximise your borrowing, you may choose to let the lender secure against another property, in addition to the land.
If the additional security is in reasonable demand, such as a residential property, you may benefit from a reduction in the interest rate.
Although your personal circumstances will be checked when looking to make a new application, they aren’t the whole story. Lenders will look at the following info about you:
In addition, the lender will look at the security offered. The key questions here will be:
Although you will be subject to the above criteria points with most lenders, we can offer funding to most applicants, as long as the loan to value is acceptable.
Issues such as previous credit problems, lack of experience or a low net worth can reduce your choice of lenders, but there are still usually options.
Generally speaking, they aren’t any more difficult than funding against property, although each application is assessed on its merits.
Land without planning is more difficult than sites with full planning permission, due to the inherent planning risk.
Although this is the case, some factors can increase the desirability of land with no planning permission. The biggest selling points are lapsed planning permission, inclusion in the local plan or a strong alternative use.
We can offer finance against land to a range of borrowers, including:
Your chosen exit strategy is up there with loan to value for the most important factors in assessing a land bridging loan.
There are some common methods of repaying land bridging finance are:
Yes, we can offer finance whether planning permission is in place or not. Although the process may be slightly different, borrowing is still usually achievable.
There needs to be a realistic exit strategy in place and any lender will expect a realistic way of disposing of the asset in the event of default. As such, land without planning should be desirable in some way to ensure that it’s seen as suitable security.
Land is a less liquid asset than property, which means any sale price is less predictable should a sale be required quickly.
Although the rates are slightly higher, they are highly dependent on the quality and desirability of the site.
As there is a smaller pool of buyers for land, especially land without planning, it leads to a more cautious approach from lenders. As such, lenders price their loans based on a perceived higher risk.
