How to Get a Land Mortgage

If you want to purchase land, there are certain mortgages you can look into. Find out more about these specialist loans to buy land before you begin your application.

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Home Commercial Mortgages How To Get A Land Mortgage
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Nathan Porter

Reviewer: Nathan Porter

Independent Mortgage Advisor

Updated: April 8, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

April 8, 2024

If you’re looking at buying a plot of land and need to find a way to finance it, there are specific mortgages out there that are tailored to different uses and ventures. Whether it’s farm or woodland, a commercial undertaking or you want to build your own home, there are lenders out there with lending products to match every land purchase eventuality.

These work slightly differently to traditional residential mortgages, with applications and interest rates that have their own criteria. Here we look at what is involved and how to go about securing such a loan.

Can you get a mortgage to buy land?

Yes, getting a land mortgage in the UK is possible. They often require a higher deposit (30-50%), have higher interest rates, and shorter terms. Availability is limited to specialist lenders, with approval depending on land type, planning permissions, and your specific purpose and development plans for the land.

It’s important to note that the process of securing a land mortgage is more complex than for a standard residential mortgage. This complexity arises from several factors, including the perceived higher risk associated with land mortgages. As a result, lenders have stricter eligibility criteria and require robust evidence of the loan’s viability. For example, applicants should be prepared to present a comprehensive repayment plan, among other documents, to demonstrate how they intend to meet their mortgage obligations.

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How land mortgages work

There is no one-size-fits-all land mortgage out there. The kind of loan you will get will depend on what kind of land you’re looking at. Typically, it will fall into one of three categories:

  1. A self-build mortgage if you’re looking to build a home on a plot that’s for sale
  2. An agricultural mortgage if your intention is to buy or extend a working farm;
  3. A commercial mortgage if you’re looking at conducting a money-making venture on a holding, such as building homes to sell.

All land in the UK is considered as having a purpose, therefore the borrowing on any particular piece of earth will need to be clarified and distinct. Expect different features from different mortgage types, which we’ll go into in more detail below.

Eligibility criteria

The crucial qualification for land mortgages are along the same lines as most other mortgages, which is how well you are able to afford to pay it back. Because land can be harder to sell, make money on and get planning permission for, mortgage lenders will be looking for hard evidence of how you will mitigate this risk.

This is where the strength of your application comes in. It’s advisable to work with a specialist broker, like the ones we work with, to pull together a strong argument as to why you are a safe bet when it comes to being granted a land mortgage.

Deposit requirements

Lenders will set loan-to-value (LTV) allowances according to a number of factors, some depending on the kind of land use, as well as your credit score and cost of the land or building. It’s likely you’ll get more leeway with a self-build mortgage – perhaps between 75%-85% – and commercial mortgages can also be up to about 80%. Some agricultural mortgages might require higher deposits of up to 50%.

Do you need planning permission?

Your application will be far stronger if you have all the required permissions in place before you attempt to finance a plot of land. It’s not totally mandatory for all lenders, however it will dramatically reduce your chances of success, or at least securing favourable rates and LTVs, without it.

If you don’t have relevant planning permission or are hoping to change the land’s use, you may still need written permission from a local authority, and willing lenders may ask for extra collateral. That said, changing a land’s use can be very difficult to obtain, so expect hurdles if this is your intention.

Find out more about planning permission applications in this government portal here.

How to get a land mortgage

Follow these simple steps to begin your course of action:

Gather your documents:

You will need evidence of income, business plans, budgets, planning permission and credit worthiness in order to put a strong application together and attract a lender. Do this first so your broker knows what your circumstances are.

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How much your land mortgage will cost

While there are so many factors at play with this kind of mortgage that make it difficult to give wholly accurate repayment figures, our calculator can give you an estimate to get you on track for your mortgage budgeting and planning.

Try it here.

Land Mortgage Repayment Calculator

This calculator can tell you the monthly and overall cost of your mortgage, based on the loan amount, interest rate, and term length.

Enter the amount you're borrowing
£
Between 3.5%-6% is the average rate for a land mortgage
%
Enter the mortgage term, 25 years is the average but lenders can offer shorter and longer terms
years

Your Results:

The monthly repayments on a mortgage would be

The total amount paid at the end of your mortgage term would be

Get started with an expert broker to find out how much they could help you save on your mortgage repayments.

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Which lenders offer land mortgages?

There are a number of mainstream lenders as well as niche financiers who get involved with land mortgages, however it’s worth noting that many don’t have any offerings on certain types of land mortgages.

For example, Barclays offers agricultural mortgages on fixed or variable rates, but does not currently provide self-build mortgages. Halifax does consider self-build mortgages, but not agricultural loans. There are also a number of specialist lenders, such as Farm & Country Finance, as well as commercial ventures.

It’s best to look for the best mortgage based on the use of the land you’re intending to buy, which is where you’ll find very specific products.

What interest rates to expect

Typical land mortgage rates can be between 2%-3% above the Bank of England base rate, with rates much higher for agricultural and commercial plots, especially if you’re looking at greenbelt land.

The exact rate you’ll end up with will depend on the variables we have already discussed, and how attractive and risk-averse you appear to be as a potential borrower. It is impossible to give a single answer to this question, especially when the financial landscape is so volatile. However, do expect interest rates to be slightly higher for this kind of financing.

Can you get approved with bad credit?

It’s not impossible to secure a land mortgage with a poor financial history behind you, however it might make the application process lengthier and more arduous. A land mortgage broker can help you to navigate the way and look at your prospects, knowing that there are a number of bad credit mortgage lenders out there who might be able to help.

Other ways to finance a land purchase

If you want to look at other ways to raise the capital to buy your own land, you could consider other financing options, such as equity release from an existing property or business, remortgaging to release equity or looking into second charge mortgages. You could also consider other kinds of loans, such as a business or personal loan, or borrow from a family member.

Speak to a land mortgage broker

As we have discussed in this article, there are many factors at play in a fluctuating mortgage landscape when it comes to purchasing land and attempting to secure finance against it. That said, if you are successful it can open exciting opportunities for the future.

The specialist land mortgage brokers we work with are experienced and highly skilled in this area of expertise, and they always work hard to ensure they get the very best deals over the line for their clients. You can start your search today – we do the work of matching you to the right advisor with our tailored service, and you can get started with your handpicked advisor after that.

Contact us on 0808 189 2301 for a free initial chat, or make an online enquiry.

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FAQs

Yes, some lenders who provide land mortgages are open to applications from first time buyers, be prepared for higher rates though. You can find out more about first time buyer self-builds here and you might also be able to get a commercial mortgage with specialist lenders if you’re a first-time buyer and first-time landlord too.

Yes, but this is a route you would typically only go down if you have high net worth exemption and are buying a plot of land that’s worth at least £1 million.

To qualify for this, you need to have an annual net income of £300,000 or assets worth £3 million or more. If you fit this criteria, consult our guide to high net worth mortgages to find out what options might be available to you from private land mortgage lenders.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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