Buying land with planning permissions makes things a whole lot easier as you buy some level of certainty. Be sure to check when the permissions expire so you are not buying land which you may need to regain planning permissions for.
Most mortgage lenders may not lend on properties without planning permissions and for properties with planning permissions, the mortgage lender may want to see when the permission expires.
Most high street mortgage lenders may not offer mortgages for land with planning permission but you may be able to find more specialist mortgage lenders willing to lend to you.
When you get a land mortgage it is very likely that the mortgage lender will release the mortgage funds to you in stages.
These may be stages of your project and if you don’t meet any of the targets or costs start to overrun then you may not receive the rest of your mortgage funds and the land could be repossessed by the mortgage lender to recover their funds.
In the case where funds are released by stages, the mortgage cost will be much more expensive as surveyors will have to revisit the land at different stages to measure the progress being made.
Planning permission vs outline planning permission
Some plots of lands will already have full planning permission from the local authority. This means that detailed plans are already in place for the land and you can access these from the public register of the local council.
You should know exactly what is contained in those planning permissions as they may affect your ability to get a mortgage.
In other cases, the land may not have full planning permission but may have an outline planning permission.
You may still be able to get a mortgage deal if the land has outline planning permission.
Outline planning permission is cheaper to get than standard planning permission and it doesn’t offer any guarantee that you will be able to build on the plot of land but it does offer some degree of flexibility as to what you may be able to build on the land.
Outline planning permissions also give a good indication of what kind of permission you will likely obtain for the land when you apply for full permission.
Regardless of what planning permission you have you should check how long you have left as all planning permissions expire within 3 years and the mortgage lender will be checking for this too.
Getting a mortgage for land with planning permission is, therefore, a much better situation than trying to secure a mortgage on land without any permission.
If you are then looking to develop the land the mortgage lender may also be able to lend you more finance to develop the land.
Different mortgage lenders will all have their own lending criteria and some mortgage lenders may not lend on:
- Funding for brownfield sites
- greenbelt land
- industrial sites of all nature
- commercial of all nature available
- Agriculture land
When applying for a land mortgage, the mortgage lenders will usually request to see a financial plan detailing out the scope of your project the costs involved, the time involved and the resources needed.
Most mortgage lenders who lend on land will have similar criteria as per below:
- Mortgage terms from 1 month to 5 years
- 1st charge, 2nd charge, equity or joint ventures
- Funding from £100,000 (no maximum)
- Typically will lend 75% loan to value of open market value
- Rates from 0.59% PCM to 2% PCM
- Interest rolled up, retained or serviced monthly
- No upfront mortgage fees
- Bad credit accepted by some mortgage lenders
What fees will you pay for a land mortgage with planning permission:
The fees you will pay for a land mortgage are very similar to those you may pay on a residential mortgage.
mortgage application fees: This is paid to either a broker and/or lender to cover the cost of your mortgage application.
Land valuation fees: A land valuation fee is paid to the mortgage lender so that they can appoint a surveyor who will value the land and report back to them. Most mortgage lenders will not provide a [mortgage offer](https://blog.huutimoney.com/mortgage-offer/) on land that they have not valued. Valuation fees may increase, where funds are released in stages and surveyors are instructed several times throughout the development.
Legal fees: A conveyancer will be needed to carry out searches on the land and then transfer the deeds over to you.
How much deposit will you need for a land mortgage?
You may need as much as a 20% mortgage deposit for a land mortgage
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.