I’m Damian Youell an experience mortgage broker with over a decade of experience. I’m dedicated to helping clients by offering an efficient and friendly service.
Over the years we have streamlined our systems and procedures and adapted processes to enable us to make the whole process very straight forward and easy for our clients.
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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.
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 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 be begin until a detailed application for Full Planning Permission (FPP) is granted. FPP provides detailed plans and specification 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.
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.