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Land mortgages

Find out all you need to know about securing a land mortgage in the UK, no matter what purpose you're buying for...

A n aerial photo shows semi-rural land from above, with a number of grassy fields and some buildings visible in the distance. There is a white dotted line in the shape of a square demarking a plot of land for sale

Can I get a mortgage for land?

Yes, it’s possible to get a mortgage to buy land, but there are far fewer lenders available than those offering mortgages to buy property. Most mortgages for land are offered by specialist lenders, as mainstream lenders tend to shy away from this area of finance - which is considered higher risk than property purchase.

Given the above, getting a mortgage on land in the UK can be difficult, but it’s certainly possible with a strong application and substantial deposit. As the application process can be fairly complex, it’s a good idea to enlist the help of an experienced land mortgage broker. 

One of the most important criteria that lenders will be looking for is a clearly defined plan of your intentions for use of the land. This will include what type of plot you want to buy, whether a change of use is intended, a financial plan, and whether you already have, or are establishing planning permission. 

Other criteria are similar to traditional mortgages, such as affordability, credit history and deposit size.

How does a land mortgage work?

Funds for land mortgages are usually released in stages, depending on the type of project that you carry out. This is particularly true if you are building on the land, as opposed to buying for agricultural or private leisure use.

The interest rates for a mortgage to buy land depend on your circumstances, but are typically high. If you’re building on the land you purchase, it’s usually advisable to remortgage once the build is complete. This way you can take advantage of a lower interest rate based on the completed property.

Some lenders will not lend on land unless it has necessary planning permission already in place, and others will need to see that you’ve at least made an application. Land for sale with the correct planning permission already in place can be difficult to come by, but can be easier to secure financing for. 

If your planning application is still outstanding, this could reduce the maximum LTV (loan to value) that a lender is willing to offer. They may also require a greater deposit or another form of additional collateral. If you already have planning permission in place, this will usually allow you to access better interest rates.

What type of land can I get a mortgage on?

The type of land you wish to purchase will be one of the main factors in finding a suitable land mortgage. Certain plot types will be much more difficult to find a lender for than others:

  • Residential plot (to build your own home) - lenders available that offer suitable land mortgages 

  • Commercial plot (for business use/development) - lenders available that offer suitable land mortgages

  • Agricultural plot (for agricultural or leisure use) - fewer lenders available that offer suitable land mortgages

  • Brownfield land (residential or commercial use) - fewer lenders available that offer suitable land mortgages

  • Greenbelt (for any purpose) - very few lenders, unlikely to be available

What land mortgage options are available

There are a few different types of land mortgages for land, and the type you need will depend on the category of land you’re buying - as well as whether the planned use is different to its current purpose:

  • Self-build mortgage - As the name suggests, this is to by land that you intend to build your own home on, and you will usually borrow the cost of the build simultaneously 

  • Agricultural mortgage - For land that will be used for farming purposes, either for self-sufficiency, or to make a profit through the sale of agricultural produce

  • Commercial land mortgage/ Development finance - This is for if you intend to use the land for any other form of commercial purpose outside of farming. This may include building residential property for sale or rental, commercial units for sale or rental - or to carry out your own business, or to build commercial leisure facilities of any kind 

  • Woodland mortgages - It’s unlikely that you’ll be able to change the use of woodland, but you can purchase this for future investment or certain defined uses, such as a private woodland sanctuary

How much deposit do I need for a land mortgage?

As mortgages on land are considered high risk, the deposit requirement is typically higher than for property mortgages. This will vary from lender to lender, but it’s unusual to find a land mortgage with a deposit requirement below 20% of the land’s value.

The intended use can also impact the size of deposit required. Agricultural and woodland mortgages may require up to 50% deposit, whereas it’s sometimes possible to get a self-build mortgage with a deposit as low as 15% - although 25% is typical. 

Other fees involved in Land mortgage

Much like with property purchase, there will be some standard mortgage fees to pay, no matter what type of land mortgage you need:

  • Application fees

  • Valuation fees

  • Legal fees

  • Stamp duty (In some cases)

  • Planning permission application(s) (In some cases)

How to increase your chances of being approved for a land mortgage

  • Planning permission - Buy land with the correct planning permission already in place, or apply for planning permission ahead of your application. This can result in a loss of planning application fee if you’re declined either planning permission or the mortgage, but gives you a greater chance of securing a lender

  • Strong plan - No matter the intended use of your land, a detailed plan of how you intend to develop and use the land, alongside financial plans and profit projections (in the case of commercial endeavours) will help convince the lender that you are a lower risk borrower

  • Large deposit - As with all mortgage applications, the greater the deposit size, the lower the LTV of your borrowing. This will make it easier to get a land mortgage approved, so saving a higher cash sum or offering additional collateral in the form of assets could increase your mortgageability

  • Research - Lenders will prefer that the land retains its value well, so ensure you choose land that is fit for the intended purpose. For example, a rural commercial development may be deemed higher risk than an urban one

  • Credit score - Lenders will want to be confident in your creditworthiness, so it’s a good idea to look at your credit file prior to application and make any improvements you can by paying off debts, closing old accounts and ensuring your current address is on the electoral roll

Kellie Steedquotation mark
Land mortgages can be tougher to come by than mortgages for property, so it's a good idea to seek out the advice of a broker who specialises in this area of lending. They will also be able to help you strengthen your application for a greater chance of success.
Kellie Steed, Mortgage Content Writer

Land mortgage FAQs

Which lenders offer land mortgages?

There are far fewer lenders that offer land mortgages than property mortgages, and those considered mainstream lenders, such as major banks, don’t usually have this type of product. 

There are some exceptions, for example, Halifax offers self-build mortgages, but specialist lenders will be needed for most land purchases. Usually there will be specialist lenders for each type of land purchase, so if you’re wanting to buy agricultural land, some lenders will offer that form of finance exclusively.

Can I get a self-build mortgage on land I already own?

Yes you can. Self-build mortgages can be taken out with or without the additional funds to purchase the land. Not all lenders provide both options, some will only provide self-build mortgages if you already own a plot.

Do I need to pay stamp duty on a land mortgage?

Stamp duty around land mortgages can be fairly complex, as it will depend on the intended use of the land, and where in the UK you are buying it. 

For example: self-build mortgages in England and Northern Ireland it’s payable on the land value, not the value of the final property. This means it’s often cheaper than when you buy a ready built house. 

On agricultural land the rates are lower, due to non-residential usage. Wales and Scotland have similar rules, but different rates for non-residential land tax. 

It can be fairly complex to determine which type of stamp duty you’ll need to pay when buying land, so it’s a good idea to speak to a qualified tax adviser with experience in this field.

Are there any alternatives to land mortgages?

As land is often sold at auction, it’s not uncommon for bridging loans to be used, as they enable the buyer to meet the strict 28 days payment terms of auction transactions. Bridging loans are charged at a higher rate than mortgages, so are usually used for short-term finance only.