Land Finance
Bare land is treated as genuinely higher risk by almost every UK lender – no rental income, no guaranteed value uplift, and without planning permission, no certainty it can ever be developed at all. If your plan is to hold land longer-term or move relatively soon into a full development, it’s worth understanding how term land finance differs from a short-term bridging approach.
Why Land Is Assessed So Differently to a Finished Property
Lenders can’t rely on a straightforward valuation or a tenant’s rental stream to underwrite land the way they would a completed building, so they price the genuine uncertainty into both the rate and the loan-to-value on offer. The single biggest factor shaping every aspect of a land finance application is planning status.
The Three Planning Tiers and How They Affect Your Terms
Land with full detailed planning permission is viewed most favourably, commonly supporting up to around 70% loan-to-value. Land with outline planning permission sits in between, generally requiring a larger deposit than fully consented land. Land with no planning permission at all – sometimes described as hope value land – is the hardest to finance, with very few specialist lenders willing to consider it, typically capping loan-to-value around 50% and often requiring personal guarantees or additional collateral to compensate for the genuine uncertainty involved.
Why the Lender Values Land at Its Present State, Not Its Hoped-For Future Value
If you’re paying a premium for a plot because you’re anticipating planning permission will eventually be granted, it’s worth understanding clearly that lenders value the land at its current, unconsented state, not the higher value it might achieve once planning comes through. This means your effective loan-to-value can genuinely be lower than the headline figure suggests, and you may need a larger deposit than initially planned as a result.
Term Land Finance vs Land Bridging
Our Land Bridging Loans page covers short-term bridging finance for land, typically used to secure a plot quickly ahead of a specific event – planning being granted, a sale, or a refinance. Term land finance is structured differently, generally suited to holding land for a longer period, commonly priced at 6-9% per annum for consented land, considerably lower than typical bridging rates, though with less flexibility around early exit.
Why Going Straight to Development Finance Can Make More Sense
If you genuinely intend to break ground within 6-12 months of acquiring the site, taking out a standalone land facility and then separately refinancing into development finance once you’re ready to build is often less efficient than moving straight into a development finance structure from the outset. Our Senior Debt and Stretched Senior Debt pages cover this route in detail, worth discussing with your broker if your timeline is genuinely tight enough to skip the standalone land stage entirely.
Option Agreements: Securing Planning Before You Complete
Because planning permission attaches to the land itself rather than to whoever owns it, it’s sometimes possible to secure planning consent before you even complete your purchase, using an option agreement that gives you the right to buy the land once planning is granted, without committing to the purchase upfront. This is worth discussing with your solicitor and broker together if you’re considering a genuinely speculative site, since it can meaningfully de-risk the transaction compared with buying unconsented land outright.
Income-Generating Land: A Different Route Entirely
If your land already generates income – let to a farmer, hosting a telecoms mast, or used for storage – a standard commercial or agricultural mortgage is generally the more appropriate route than land finance specifically, since the lender can assess the existing income stream rather than pricing purely against speculative future development potential.
Costs Beyond the Headline Rate
Beyond the interest rate itself, it’s worth budgeting for an arrangement fee, commonly 1-2% of the loan and often deducted directly from the facility on drawdown, alongside valuation and legal fees on both sides of the transaction.
Documentation You’ll Need
A typical land finance application requires details of the plot itself, current planning status and any supporting planning documentation, a clear statement of your intended use – holding, onward development, or resale – and a genuinely credible exit strategy, since lenders will want to understand precisely how and when the facility will be repaid.
Frequently Asked Questions
Can I get finance for land with no planning permission at all?
It’s genuinely difficult – very few specialist lenders will consider it, typically capping loan-to-value around 50% and often requiring additional security.
Will I be able to borrow against the land’s value once planning is granted?
Not at the outset – lenders value land at its current, unconsented state rather than any anticipated future value, meaning your effective borrowing is based on today’s value, not tomorrow’s hoped-for uplift.
What’s the difference between land bridging and term land finance?
Land bridging is short-term and typically tied to a specific event like planning or a sale; term land finance suits holding land for longer, generally at a lower rate but with less flexibility around early exit.
Should I take out land finance separately, or go straight to development finance?
If you intend to start building within 6-12 months, going straight into a development finance structure is often more efficient than a standalone land facility followed by a separate refinance.
What is an option agreement and how does it help with unconsented land?
It gives you the right to buy the land once planning permission is granted, without committing to the purchase upfront, since planning attaches to the land itself rather than to a specific owner.
Get in touch with details of the land and your intended timeline, and we’ll help you understand whether term land finance, land bridging, or moving straight into development finance genuinely suits your plans.
