How to Get a Land Mortgage

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

These work slightly differently from traditional residential mortgages, with applications and interest rates that have their own criteria.

Here, we look at what is involved and how to secure 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%), higher interest rates, and shorter terms. Availability is limited to specialist lenders, and approval depends on land type, planning permissions, and your specific purpose and development plans for the land.

It’s important to note that securing a land mortgage is more complex than securing 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.

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 to have a purpose; therefore, 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 is 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 the 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 before attempting 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 hope 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:

How much your land mortgage will cost

While there are so many factors involved in this kind of mortgage that it is difficult to give wholly accurate repayment figures, our calculator can give you an estimate to help you with your mortgage budgeting and planning.

Try it here.

Which lenders offer land mortgages?

A number of mainstream lenders and niche financiers are involved with land mortgages. However, it’s worth noting that many don’t offer 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 and commercial ventures.

It’s best to look for the best mortgage based on the use of the land you intend to buy, as this 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 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 lengthy 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 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 discussed in this article, there are many factors 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. They always work hard to ensure they get the very best deals for their clients. You can start your search today—we match you to the right advisor with our tailored service, and you can get started with your handpicked advisor after that.

Contact us on 0330 818 7026 for a free initial chat, or make an online enquiry.