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Mortgage Advisor & Director
Can I get a mortgage to buy land?
Getting a mortgage to buy land can be complicated due to the lack of mainstream lenders in this area. While land finance does exist, this is generally through specialist mortgage providers. At Teito, we are a whole-of-market broker which means we have access to deals that are not accessible to the general public, including lenders for land-only mortgages.
Whether you are looking to buy land to build your dream home or to develop and sell on, we can help you to get a mortgage.
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.
The table below describes the type of land alongside the number of lenders and interest rates available.
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 |
How much deposit will I need for a land mortgage?
The amount of deposit you can expect to pay will take into account various factors, including the plans for the land, the applicant's credit history, age and other eligibility factors.
If you are buying land at an auction, you can expect to put up a 10% deposit on the day to secure the deal with the rest due within 28 days financed either by a mortgage or paid in cash. Generally, deposits to buy land are higher; you can expect to pay around a 30% deposit on land purchases compared to 15% on a residential home.
Land mortgage rates
As with the deposit, you will find that land mortgage rates are typically higher than what you can expect to achieve for a house, and can be anywhere from 3% to 4.5%.
Land mortgages are also a lot shorter than residential mortgages and generally do not exceed five years.
The rates you will realise are affected by various factors, including:
- Where the land is located
- The lender
- The Loan to Value ratio
- The size of the loan
- Whether the land has full or outline planning permission
- Your credit record
What about land mortgage fees?
As with a residential mortgage, there are fees to consider when buying a piece of land. These include application fees paid to the lender, valuation fees to a qualified surveyor and legal fees to the conveyancer.
Can I get a land mortgage without having planning permission?
You are likely to be offered a better deal on your mortgage if you have planning permission in place.
It is more challenging to get a mortgage to buy land that doesn't have planning permission in place, and the pool of available lenders is narrowed. Without planning permission in place, this introduces risk in the eyes of the mortgage provider. If planning permission cannot be obtained, then the development cannot go ahead, and the business case goes out of the window.
The type of land you are looking to buy will influence the likelihood of planning permission being granted, with some lenders not willing to consider green belt land purchases, for example.
Lenders will also 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 are looking to build. The more comprehensive your submission, the more likely it is to be accepted.
Our advisors can help guide you through this process, or read our guide to buying land with planning permission.
Can I get a bridging loan to buy land?
Until you have planning permission secured, it might make sense to get a bridging loan before applying for a mortgage. This funding will tide you over until you are ready to proceed with the mortgage application. Beware that these are short term options and as such come with much higher rates than you would achieve on a mortgage. The lender will want to see a viable exit strategy in place.
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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.
Mortgaging to buy land to build a house
You will need to apply for a self-build mortgage to buy land and build a house.
The funds are released in phases to align with the build process, which means you receive the funds when you need them. There are a few perks to a self-build project:
- Avoid stamp duty - you are likely to be able to buy a plot under the stamp duty threshold of £125,000.
- Build your dream home - this is your opportunity to build exactly what you want, subject to planning restrictions
- 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!
How can I learn more?
To learn more about buying land with planning permission, read our guide, or 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.
Last updated 29 February 2024