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How to Get a Land Mortgage

Read our guide on how to get a Land Mortgage and secure the best rate with our expert guidance

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: April 20, 2022

Mortgages aren’t just for buying property. You can use them to purchase land too, but it’s often a completely different kettle of fish.

In this guide, we’re going to outline how land finance, how to go about getting a mortgage to buy land in the UK and much more. Plus in our FAQ section, we answer the questions we hear most often about land mortgages.

Can I get a mortgage to buy land?

Yes. You can do this by taking out a land mortgage which, as the name suggests, is a financial product most commonly used to buy plots of land.

How does it work?

Land mortgages can be secured against everything from agriculture to commercial development or industrial buildings. Though they’re more common in rural areas, land mortgages can be found on urban sites too. You can get a mortgage for land only, or for land that already has property on it.

As such, there’s a massive amount of variety from one land mortgage to the next. It all depends on where you’re buying and what you plan to use the land for.

Land mortgages are assessed in much the same way as standard residential mortgages but can be harder to get, since this corner of the market is more specialised and there are far fewer lenders offering land loans compared to regular property mortgages.

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How much deposit do you need to buy land?

Land mortgage deposits are usually higher than those on conventional residential property. You’d likely be looking at a minimum of a 30% deposit, depending upon your circumstances. The exact amount you will need to put down will depend largely on where and what type of land/property you’re buying – and what you plan to do with the plot afterwards.

Can you mortgage land without a deposit?

Possibly. With the right lender and enough collateral, you may be able to reduce your deposit size, or forego a deposit entirely. It could be tricky, depending upon the industry you’re in – and securing debts against your assets is not something to be taken lightly.

Land mortgage rates

Land mortgage interest rates are higher than those for residential mortgages. A number of factors will determine the actual rate you end up with and they include…

  • The location of the land (some areas are more sought after than others)
  • What you intend to do with the plot and how risky the lender things that venture is
  • Your loan to value (LTV) ratio and the status of land; e.g does it have outline planning or full planning permissions?
  • Your personal credit history
  • Your business’ trading history and the industry you’re in (if relevant)
  • The overall size of the loan

How to get the best rates

There’s a few things that you can do to boost your chances of securing the most favourable interest rate available…

  • Improve your credit: Take steps to improve your personal and business credit. You can read more about this in our guide to optimising your credit file for a mortgage.
  • Lower your expenses: Many lenders will stress test your financing against possible future rate rises. Cutting out unnecessary expenses for both yourself or your business can help boost your creditworthiness. This might include paying off any debts you’re in a position to clear or seeking advice about consolidating debt.
  • Put up or increase your collateral: A lender will see your application as lower risk if your debt can be secured against another tangible asset, such as a property or asset you own and hold sufficient equity in. But be careful with this as defaulting on your mortgage payments could result in the repossession of the security you’ve put up.
  • Increase your deposit size: The larger your deposit, the lower your LTV and the lower your perceived risk.
  • Speak to a land mortgage broker: They will know exactly which specialist lenders can offer the most favourable rates on a land mortgage to a customer with your needs and circumstances. They can offer you bespoke advice, help you with your paperwork and potentially save you time and money by introducing you to the right lender, first time.

Can I get a land mortgage without planning permission?

Yes, but it could be a lot harder, as some lenders just won’t lend for land without planning permission at all.

Land mortgages can be broadly divided into two categories – those for land with planning permission, and those without it. It’s usually much easier to get a mortgage on land that has permission – because the difficulty of obtaining permission creates a lot of uncertainty in the minds of lenders.

You’ll likely be offered a smaller LTV, up to 65% at the best of times. A lender may also want you to put up collateral, and to have it in writing that the local authority will be willing to grant permission, once the necessary steps are taken.

You’ll also want to have a very strong business plan, an experienced team and preferably a track record of having done something similar in the past. It’s probably not going to be easy.

Applying for planning permission

If you’re not sure if you need planning permission, check with your local authority. You can find more information on this, register for a planning application account and apply for planning permission online through the UK Government’s planning portal here.

If you don’t have planning permission, you’re likely to need it before doing anything significant with your property. Depending on what your plans are, this might be the more difficult and prolonged part of the process. You’ll likely need planning permission to:

  • Build on a property
  • Modify an existing property (i.e. building an extension)
  • Change what the land is being used for
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What other options do I have?

There are a number of possible ways you can take out finance to purchase land, including…

Read on to find out more about these options or make an enquiry to speak with an expert and find out what other alternatives might be available to you.

Bridging loans

Bridging loans could be another option in this kind of deal. This could tide you over whilst you go about securing the planning permission

Careful though, they’re usually offered at a far higher rate than a mortgage, and lenders will always want to see a viable ‘exit strategy’ before offering you one. In this case, the exit strategy would be either refinancing the debt onto a mortgage or the sale of the land afterwards.

Commercial mortgages

Whether you need a commercial mortgage for your land purchase depends entirely on what you plan to do with the site you’re buying. If you’re planning to develop a commercial property on the plot, then a commercial mortgage could be a viable option.

Commercial land mortgage rates are typically higher than commercial property mortgages and most lenders will cap the loan to value (LTV) ratio at 50%.

Development finance

If you want to purchase a plot of land for commercial development and have the means and expertise to carry out (or at least oversee) the works yourself, a development finance loan could provide a viable alternative to a commercial land mortgage.

Development finance is a form of short term borrowing which can cover the land acquisition and the subsequent construction works. Most lenders are willing to offer 70-75% of the initial purchase cost and 100% of the construction funds, released in staged drawdowns.

To qualify for development finance, the borrower must evidence a viable exit strategy in advance, which in this case, would usually be the sale of the scheme or a remortgage, i.e. refinancing the debt onto a commercial mortgage based on the post-development value.

Self-build mortgages

If you’re planning to buy land and build a house on it, a conventional residential mortgage won’t cut it. You’ll instead need to apply for a ‘self build’ mortgage. This is a specific kind of mortgage to buy land and build houses.

It works in instalments, instead of a single lump sum. For example – you get the first payment once you’ve bought the land, another one after the foundations are laid, a few more at other intermediate stages, and the last one when the property is complete.

A smaller number of self-build mortgages release the funds in a lump sum, which is useful for certain building projects in which there are large up-front fees to be paid.

Like most land mortgages, self-build rates interest rates are a little higher than on a standard mortgage, and only a minority of lenders will offer these products.

Agricultural mortgages

Agriculture is an almost entirely land-based business. As a result – buying land for agricultural use is a very popular form of rural land mortgage.

There’s actually a more specific category of agricultural mortgages, which are better suited to farms and agriculture. If you want to learn more about these – take a look at our agricultural mortgage section.

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How to get a mortgage on land

Speaking to a whole-of-market broker is always a good start, as this will give you access to all of the best deals you qualify for. But first you should consider how you want to go about buying the land…

Buying land at auction

A high volume of land is sold through auction, a very different process to how most residential property is sold.

Generally, a 10% deposit is required on the day, along with the rest of the balance (either cash or through mortgage financing) in the next 28 days.

If you don’t have the rest of the money or the mortgage financing in place by the 28th day, you could lose your deposit and be liable for other fees and charges – so it’s important to sort out your financing before making the commitment at auction.

Should you need to raise the funds quickly, a bridging loan might be a more viable option than a mortgage as they are typically much faster to arrange.

Buying via land agents

An alternative to buying at auction involves land agents. Land agents are similar to estate agents and commercial property agents – matching up buyers and sellers.

Like most property agents, they usually work on behalf of the seller to get the highest sale price, and they want to be sure that you have the financing in place before closing a deal. In such arrangements, mortgages in principle are important.

Speak to an expert

As a small and specialised sector, finding the right finance for land purchase or redevelopment can be hard, time-consuming work. Simply put, there are less land mortgage lenders, many of them are harder to find, and some only operate through mortgage brokers.

Whether you need a bridging loan, a mortgage or both – the best way to succeed with your financing is to work with a mortgage broker who knows land mortgages in-and-out. They can find the perfect lender for your needs and circumstances.

There are brokers in our network who specialise in land mortgages and they can offer you bespoke advice, help you with all that paperwork and make sure you’re introduced to the right lender, first time. Call 0808 189 2301 or make an enquiry online and we’ll arrange a free, no-obligation chat between you and the advisor best placed to help you today!


Should I use a land mortgage calculator?

You can use a land mortgage calculator, found on many lenders’ websites and online financial hubs, to work out how much you might be able. But remember to treat these figures with a pinch of salt – an online calculator can only give you an outline of what’s possible.

For a better idea, speak to one of the expert mortgage advisors we work with.

Can you get a mortgage for land if you have bad credit?

Yes, but it may be harder to find a lender. It really depends on what you’re planning to do with your land purchase, whether the land has planning permission or not, and how much of a deposit you can raise.

There are bad credit mortgage lenders who will consider offering a mortgage to someone with bad credit. It depends on how long ago the incident took place, the severity and what the final outcome was.

Do banks provide mortgages for land?

Land mortgages are a more specialised category that many high-street lenders aren’t really set up to finance. Speaking of lenders – there are far fewer lenders in this space, but the ones who do are usually very specialised.

There are some high-street outfits willing to get involved, but much of the volume is done by specialist land mortgage companies or private banks – with greater appetites for creative deal-making and risk-taking.

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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 OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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