What is the best way to borrow money to buy land?

The best way to borrow money to buy land depends on factors such as planning permission, how quickly you need the funds, and your long-term intentions for the land. Unlike residential properties, land purchases often require specialist finance because most high-street lenders do not offer standard mortgages for undeveloped plots. The most common and effective options include land mortgages, land bridging loans, and development finance.

1. Land Mortgages A land mortgage is a long-term finance option best suited for plots with full planning permission. This type of loan typically offers lower interest rates compared to short-term products but comes with stricter criteria and a longer application process. You will usually need a deposit of 30-50% of the land’s value, and the lender will want proof of planning consent or a viable plan for the land’s use.
2. Land Bridging Loans If speed is crucial-such as for land purchased at auction or plots without planning permission-a land bridging loan is often the best solution. These short-term loans, usually 1-36 months, can provide up to 65-70% loan-to-value (LTV), with the option to borrow more if additional security is provided (e.g., using your home as collateral). Land bridging loans are fast to arrange, often completing within 5-14 days, and are ideal for securing land while you arrange long-term finance or work to increase its value through planning gain.
3. Development Finance For those planning to build on the land straight away, development finance can be the best route. This type of loan typically covers both the land purchase and up to 100% of construction costs, depending on the lender’s requirements for Loan to Cost (LTC) and Profit on Cost (POC). Development finance is often used as an exit strategy after a bridging loan for land, once planning permission is in place and the project is ready to begin.
4. Re-mortgaging Your Home or Using Equity Some buyers choose to re-mortgage their home or take out a second charge mortgage to release equity for land purchases. This can be a cost-effective solution if you have significant equity and want to avoid short-term finance. However, this option is not ideal for time-sensitive deals like land auction purchases.

Which Option is Best?

• If you need funds fast or are buying land without planning permission, a land bridging loan is usually the best choice.
• If the land has full planning consent and you want long-term finance, a land mortgage will likely offer the most cost-effective rates.
• If your goal is construction, development finance is the most suitable.