Can You Get a Bridging Loan for Land Without Planning Permission? YES! Here’s How
Introduction
Buying land without planning permission can be a risky but potentially rewarding investment. Whether you’re looking to secure a plot for future development or hoping to get planning approval down the line, funding the purchase can be a major hurdle. Traditional lenders often refuse to finance land without planning consent, but bridging loans provide a fast and flexible solution.
In this guide, we’ll explore how you can secure a bridging loan for land without planning permission, what lenders look for, and how to maximise your chances of approval.
What Is a Bridging Loan and How Does It Work for Land?
A bridging loan is a short-term secured loan designed to help buyers complete a purchase quickly, often when traditional financing isn’t available. When buying land without planning permission, bridging finance allows you to:
- Secure a desirable plot before competitors.
- Apply for planning permission while holding ownership.
- Increase the land’s value and refinance or sell for profit.
Bridging loans typically last between 3-24 months, giving you time to add value to the land before moving to long-term finance or selling.
Can You Get a Bridging Loan for Land Without Planning Permission?
Yes, you can! Many specialist lenders in the UK offer bridging finance for land purchases, even if the land does not yet have planning permission. However, these loans come with specific conditions and requirements that borrowers need to meet.
What Do Lenders Look For?
Since land without planning permission carries higher risk, lenders will assess:
- Exit Strategy: How will you repay the loan? Common exit strategies include:
- Selling the land after obtaining planning permission.
- Refinancing onto a development loan or mortgage.
- Selling part of the land while keeping a portion for development.
- Location and Development Potential:
- Land in desirable areas with a strong likelihood of obtaining planning permission is more attractive to lenders.
- Nearby developments or infrastructure projects can increase a lender’s confidence.
- Loan-to-Value (LTV) Ratio:
- Bridging loans for land without planning permission typically have a lower LTV (40-60%) compared to residential properties.
- If you can provide a larger deposit, your chances of securing a loan improve.
- Your Experience & Financial Standing:
- If you’re an experienced developer, lenders may be more willing to fund your purchase.
- Your credit history and existing assets may also be taken into account.
How to Get Approved for a Bridging Loan on Land Without Planning Permission
To improve your chances of securing bridging finance, follow these key steps:
1. Have a Clear Exit Strategy
Lenders need to know how you plan to repay the loan. If you intend to apply for planning permission, outline a realistic timeline and strategy for adding value to the land.
2. Conduct a Feasibility Study
A feasibility study shows lenders that the land has development potential. Research local planning policies, speak to architects, and consult planning consultants to strengthen your case.
3. Offer Additional Security if Possible
If you own other properties, offering additional security can help lenders feel more comfortable approving your loan.
4. Work with a Specialist Bridging Finance Broker
Specialist brokers have access to lenders who understand the complexities of land purchases. They can connect you with lenders who are comfortable financing land without planning permission.
5. Be Prepared for Higher Interest Rates
Due to the increased risk, expect higher interest rates (0.85% – 1.5% per month). However, if planning permission is secured, you can refinance at a lower rate.
Case Study: How Sarah Secured a Bridging Loan for Land Without Planning Permission
Sarah, an investor in Surrey, found a plot of land near a new housing development. The land had no planning permission, but she was confident she could secure approval based on local council plans.
How She Did It:
- She worked with a planning consultant to understand the likelihood of approval.
- She provided the lender with a well-documented exit strategy, outlining her plan to sell the land post-permission.
- She put down a 50% deposit, reducing the lender’s risk.
- She secured a 12-month bridging loan at 1% per month.
Within nine months, Sarah obtained planning permission, increasing the land’s value by 60%. She refinanced onto a development loan and started her project.
Final Thoughts: Is a Bridging Loan Right for You?
A bridging loan can be an excellent tool for purchasing land without planning permission, but it requires careful planning. Before applying, ensure you have a solid exit strategy, a good understanding of the land’s potential, and access to expert advice.
If you’re considering buying land and need funding, speaking with a bridging loan specialist can help you secure the right finance at the best terms.
For more information contact us for a fees free chat.
https://www.sunrisecommercial.co.uk/
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