In the world of property investment and development, opportunities to buy land can pop up out of nowhere and need to be acted on fast. A bridge loan is a short-term solution for when you need capital to secure a land purchase. Whether you’re a property developer, investor, or strategic landowner, land bridging finance can give you the flexibility and speed you need to grab these opportunities. This guide will explain what land bridging finance is, its key features, and how it can help you achieve your property goals.
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Land bridging finance is a short term funding solution to bridge the gap between buying land and securing long term finance or selling another property. This type of finance is for individuals and businesses who need to act fast on time critical opportunities such as using bridging loans to quickly purchase land for development or investment purposes.
Buying Land: Secure land quickly for residential or commercial development.
Paying Off Obligations: Settle urgent payments related to land purchases or developments.
Strategic Land: Buy valuable land parcels to future proof opportunities.
By being a fast and flexible finance solution land bridging loans let you grab opportunities without being tied to the timelines of traditional finance.
Land bridging loans are a type of short-term financing that provides immediate capital to cover the gap between purchasing land and securing long-term financing. These loans are typically secured against the land itself, making the land’s value a crucial factor in the approval process. Here’s a step-by-step look at how land bridging loans work:
Initial Application: The borrower submits an application to the lender, detailing the land, its proposed use, and the exit strategy. This initial step sets the stage for the lender to understand the borrower’s needs and plans.
Valuation: The lender conducts a valuation of the land to determine its current market value. This valuation helps the lender assess the loan-to-value ratio and the potential risk involved.
Credit Check: The lender reviews the borrower’s credit history to evaluate their creditworthiness. While land bridging loans are more flexible than traditional loans, a good credit history can still influence the terms offered.
Loan Approval: Once the valuation and credit check are complete, the lender approves the loan, and the borrower receives the funds. This quick approval process is one of the key benefits of land bridging finance.
Repayment: The borrower repays the loan, typically within a short period, such as 6-12 months. The repayment can be structured in various ways, depending on the borrower’s exit strategy.
Land bridging loans can be used for a variety of purposes, including purchasing land, refinancing existing loans, and covering development costs. This flexibility makes them an attractive option for property developers and investors looking to act quickly on opportunities.
Land bridging loans are a type of short term loan secured against plots of land, designed for land acquisition and development. Features include:
Loan to Value (LTV): Up to 70% LTV depending on the land value and location.
Interest Rates: From 0.75% per month depending on the land quality and planning permissions.
Loan Term: 1 to 36 months to give you time to get to long term finance or sell another property.
Minimum Loan: £50,000, no maximum loan size.
Interest Options: Add interest to the loan, pay upfront or service monthly.
These options make land bridging loans flexible for different scenarios whether you’re buying land with or without planning permission.
Land bridging finance is for:
Residential Land Purchases: Finance land purchases for housing developments or personal builds.
Commercial Land Purchases: Finance for land for offices, retail or industrial projects.
Property Development Projects: Finance for property developers who need fast funding to acquire land specifically for development, including residential and commercial properties.
Time Critical Transactions: Bridge the gap for land purchases that require immediate capital, such as auction purchases.
Land bridging loans, including land bridge loans, are available to a broad range of borrowers including individuals, partnerships, and companies. Key eligibility criteria include:
Land Type: With or without planning permission.
Applicant Type: Individuals, LLPs, Ltd companies, offshore companies, foreign nationals, pension funds.
Age: Minimum 18 years, no maximum age.
Geographic Area: England, Scotland, Wales and Northern Ireland.
Credit History: Adverse credit considered on a case by case basis.
These criteria are flexible so land bridging finance is a solution for all financial needs.
Interest rates and fees for land bridging loans vary depending on the land quality, location and planning permissions:
Land with Planning Permission: From 0.95% per month for prime locations.
Land Without Planning: 1.25% to 1.5% per month (higher risk).
Arrangement Fees: 2% of the loan amount, discounts available for strong applications.
Broker Fees: 1-1.5% of the loan amount (some brokers, like us, don’t charge a fee).
Valuation Fees: Paid to a chartered surveyor for the property valuation.
Legal Fees: Both lender and borrower.
You need to know these costs to calculate the total cost of the loan.
Land bridging finance is quick and easy to apply:
Initial Enquiry: Provide land details including full address, title number(s) and current use.
Borrower Information: Share personal or company details, name, address and registration number (if applicable).
Supporting Documents: Send valuation reports, sales particulars or other relevant docs.
Decision in Principle: Get an instant decision on your application.
Loan Approved: Once approved funds are released to meet your funding requirements.
This fast track process means you can get capital fast for time critical transactions.
Engaging a broker for land bridging can offer several advantages, making the process smoother and more efficient. Here’s why using a broker can be beneficial:
Access to Multiple Lenders: Brokers have established relationships with multiple lenders, allowing them to shop around and find the best deal for the borrower. This access can be particularly valuable in securing favorable terms and interest rates.
Expert Knowledge: Brokers possess extensive knowledge of the land bridging market and can provide valuable advice and guidance throughout the process. Their expertise can help borrowers navigate the complexities of land bridging finance.
Time-Saving: Brokers handle much of the application process, saving the borrower time and effort. This can be especially beneficial for busy property developers and investors who need to focus on their projects.
Negotiation: Brokers can negotiate with lenders on behalf of the borrower to secure the best interest rates and terms. Their negotiation skills can result in significant cost savings.
When choosing a broker for land bridging, consider the following factors:
Experience: Look for a broker with extensive experience in land bridging. Their track record can be a good indicator of their ability to secure favorable deals.
Reputation: Check the broker’s reputation online and ask for references. A reputable broker will have positive reviews and satisfied clients.
Fees: Understand the broker’s fees and how they are structured. Transparency in fees is crucial to avoid any unexpected costs.
Communication: Ensure the broker has excellent communication skills and is responsive to your needs. Good communication can make the process more efficient and less stressful.
Land bridging finance has many benefits, it’s the solution for property developers and investors:
Speed: Get funding to secure land acquisitions.
Flexibility: Use the loan for purchase, refinance land, or development projects.
Broad Eligibility: Available to UK and foreign nationals, individuals and companies.
Bespoke Solutions: Loans for residential or commercial land finance.
While land bridging finance is great, there are risks to consider:
Land Liquidity: Land is a illiquid asset so prices are less certain.
High Rates: Higher rates for land without planning permission or in non prime locations.
Risk Based Pricing: Lenders price based on perceived risk, credit history and land quality.
Limited Lender Choice: Fewer lenders do land bridging so less competition.
Knowing these risks will help you make better decisions.
Choosing the right lender is key to getting the best deal on land bridging finance. Consider:
Expertise: Work with lenders that do land bridging finance.
Rates and Fees: Compare interest rates, arrangement fees and other costs.
Reputation: Go with lenders that are efficient and transparent.
Broker Assistance: A specialist broker will save you time and get you a better deal.
Working with the right lender means a hassle free and cost effective process.
Residential Development: A developer uses land bridging finance to buy a plot for a housing development. Loan repaid when long term development finance is secured.
Auction Purchase: An investor buys land at auction and uses bridging finance to fund the purchase price while waiting for funds from the sale of another property.
Commercial Complex: A company buys land for an office development, uses bridging finance to act fast before completing a full application for a traditional loan.
Agricultural Land: A client utilized a bridging loan to quickly acquire agricultural land from a farmer, emphasizing the need for fast completion and subsequent plans for development.
These are just a few examples.
An exit strategy is a crucial component of a land bridging loan, as it outlines how the borrower plans to repay the loan. Here are some common exit strategies:
Selling the Land: The borrower sells the land to repay the loan. This strategy is often used when the land has appreciated in value or when the borrower has completed initial development work that increases its marketability.
Refinancing: The borrower refinances the loan with a longer-term loan, such as a mortgage. This approach is suitable for borrowers who plan to hold onto the land for a longer period or develop it further.
Development: The borrower develops the land and sells the resulting properties to repay the loan. This strategy is common among property developers who use the loan to kickstart their projects.
Lease Option: The borrower enters into a lease option agreement, which allows them to purchase the land at a later date. This can provide flexibility if the borrower needs more time to secure long-term financing or complete development plans.
When developing an exit strategy, consider the following factors:
Market Conditions: Understand the current market conditions and how they may impact the exit strategy. Market trends can influence the timing and success of selling or refinancing the land.
Timeframe: Ensure the exit strategy is realistic and achievable within the loan term. A well-planned timeframe can prevent financial strain and ensure smooth repayment.
Contingency Planning: Develop a contingency plan in case the exit strategy is not successful. Having a backup plan can provide security and peace of mind.
Communication: Communicate the exit strategy clearly to the lender and ensure they are comfortable with the plan. Transparency with the lender can facilitate a smoother loan process and build trust.
By understanding how land bridging loans work, using a broker, and developing a solid exit strategy, borrowers can successfully navigate the land bridging process and achieve their property goals.
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Yes you can get a bridging loan on land with or without planning permission. Land bridging loans are used by developers, investors and property owners to get quick funding for land purchases, development or investment.
ment or investment.
A bridging loan is worth it if:
You need funding for time critical purchases like land or property at auction.
You have an exit strategy, i.e. you can sell an asset or get long term financing.
The opportunity outweighs the extra cost of bridging loans. However, due to their higher interest rates and fees bridging loans are for short term needs.
A land bridging loan is a short term financing solution to fund the purchase or development of land. It’s used by developers and investors to:
Buy land quickly.
Refinance existing land holdings.
Bridge the gap until long term funding or sale is completed.
funding or sale is completed.
Bridging fees are:
Arrangement Fees: 1-2% of the loan amount.
Valuation Fees: £300 to £1,500 depending on the property or land value.
Legal Fees: Costs of drafting and reviewing loan documents.
Broker Fees: 1-1.5% of the loan amount (broker dependent).
Monthly repayments are:
Loan Amount: The total borrowed amount.
Interest Rate: 0.43% to 1.5% per month.
Repayment Type: Interest can be:
Rolled Up: Added to the loan and paid at the end of the term.
Serviced: Paid monthly. For example, a £200,000 loan at 0.75% interest would be £1,500 per month if serviced.
Yes, you can get a mortgage on land but the process is more complex than a residential mortgage. Lenders may require:
Planning permission for development.
Detailed plans for the land use.
A larger deposit (25-50% of the land value). Alternatively, land bridging loans can be used as interim funding until a traditional mortgage is arranged.
Typical rate for a bridging loan is 0.75% to 1% per month, equivalent to 9% to 12% AER. Rates vary depending on the loan type, LTV and property or land quality.
Bridging loans are easier to get than traditional loans as lenders focus on the asset value and exit strategy rather than the borrower’s credit history. However:
Adverse credit or lack of experience will limit lender options.
High risk properties or land without planning permission will get higher rates or fewer offers.
Complete the form to arrange your initial free phone consultation with our bridging loan specialist:
