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.
Mortgage for Land: What a Land Mortgage Is
You can borrow against land in the UK, but not usually with a standard residential mortgage. Land without a habitable dwelling is funded through a land mortgage, a self-build mortgage released in stages, or short-term bridging finance. Lenders assess planning permission, access, services and your exit route, and typically expect a larger deposit than on a house.
A land mortgage is a form of secured lending where you borrow against a plot of land rather than against a finished home. The lender holds the land as security, and if the loan is not repaid the lender can ultimately take steps to repossess and sell it to recover what is owed. Because bare land produces no rental income and can be harder to resell than a house, lenders assess these cases more cautiously than a standard residential mortgage.
Mortgage for Land Purchase: How Buying Land Is Funded in the UK
A mortgage to buy land in the UK is not usually a high street residential product. Funding a land purchase normally means one of the following routes, and which one fits depends on what you intend to do with the plot:
- Self-build mortgage — used where you are buying a plot with planning permission and intend to build a home on it. Funds are released in stages against build progress rather than as one lump sum at completion.
- Agricultural or land mortgage — used for farmland, paddocks and woodland, assessed on the land’s use and any income it generates.
- Commercial or development finance — used where the plot is being bought for development or resale rather than as your own home.
- Bridging finance — short-term lending sometimes used to secure a plot at auction or before planning permission is granted, then repaid by refinancing or sale.
Deposit requirements on a mortgage for land purchase are typically higher than on a residential mortgage, and the presence, absence or conditions of planning permission is usually the single biggest factor in what a lender will consider. Every case is assessed individually, so speak to an adviser before committing to a plot.
Can You Get a Mortgage On Land?
Yes, you can get a mortgage on land in the UK, but only through a small pool of specialist lenders — it isn’t available through most high-street banks. Whether you want to mortgage land, buy land to build on, or raise finance for agricultural or leisure land, the same principle applies: lenders see undeveloped land as higher risk than a residential property, so fewer of them offer it and criteria are stricter. Speaking to a broker who knows the specialist land-mortgage market is the fastest way to find a lender willing to consider your plot. Read on for more information.
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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 Mortgage for Land and Plots
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 remortgage 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 permission 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 value (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.
What Lenders Actually Need to See for a Land or Self-Build Mortgage
Getting a mortgage on land is very different from a standard residential purchase, and most of the delay borrowers hit comes from not having the right paperwork ready before they approach a lender.
Planning permission status matters more than the land itself. Land with full planning permission already granted is far easier to mortgage than land with no permission or only outline permission — most specialist lenders will only lend against land where consent is either in place or realistically achievable within the loan term, and they will want to see the actual decision notice from the local planning authority.
Funds are released in stages, not as a lump sum. Self-build and land mortgages typically release money in five to six stages — plot purchase, foundations, wall-plate/roof, first fix, second fix, and completion — with a surveyor inspecting the build at each stage before the next tranche is released. This means you usually need to fund the first stage yourself before the lender advances anything.
A detailed build cost breakdown is essential. Lenders expect a schedule of works and cost breakdown, often from a quantity surveyor or architect, not just a rough estimate. Under-costing a build is one of the most common reasons self-build finance applications stall.
Because land and self-build lending sits outside most high-street lenders’ standard criteria, it’s worth speaking to our FCA-regulated mortgage advisers before you exchange on a plot, as the right lender and staged-release structure can differ significantly depending on whether you already hold planning permission.
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Can I get a mortgage to buy land?
Yes, but the product is a land mortgage or a self-build mortgage rather than a residential mortgage, and the lending criteria are noticeably tighter. A residential mortgage is secured against a habitable dwelling the lender can value and, if necessary, repossess and sell. A bare plot has no dwelling, a thinner resale market and a valuation that depends almost entirely on what planning consent attaches to it, so lenders price and structure the loan differently.
The first question any lender asks is what planning status the land holds. Land with detailed planning permission for a specific dwelling is the most straightforward to fund. Land with outline permission is fundable by a narrower group of lenders, usually at a lower loan to value. Agricultural land, amenity land and plots with no permission at all are generally outside mainstream mortgage lending and are more often funded with a secured loan, bridging finance or cash.
Expect to put down substantially more than on a house purchase. Deposits in the region of 25% to 50% of the plot value are common, and the loan to value is calculated against the land as it stands today, not against the value of the finished property. If you intend to build, a self-build mortgage is usually the better route: it releases funds in stages against the build programme, either in arrears once each stage is certified or in advance so you can pay the builder before work starts.
Lenders will also want to see access rights, a mains services position (or a costed plan for water, drainage and power), any restrictive covenants on the title, and a credible exit — either completion of a dwelling that can then be remortgaged onto a standard product, or a sale. Borrowing against land you already own is possible on the same basis and is often used to fund the build itself.
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Damian Youell
Damian is the founder of NeedingAdvice.co.uk and the firm’s Senior Mortgage Broker. He specialises in helping clients across the UK with straightforward and complex mortgage cases, including self-employed applications, adverse credit, buy-to-let, remortgages and first-time buyer mortgages.
Alongside mortgage advice, Damian also supports business owners with protection planning, including Relevant Life Policies, Shareholder Protection and Keyperson Cover.
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