Bridging loan for lAND
In some spaces it has been dubbed the ‘race for space’, meaning the current property boom that’s emerging as more and more buyers look to move out into more spacious living arrangements.
Following the restrictions that were in place during the vast majority of 2020 and the early part of 2021, it’s perhaps unsurprising to think that many buyers and renters are now putting much more focus on their living spaces and homes after spending the best past of 18 months stuck inside them.
It’s likely that those levels of restrictions have given people the push they needed to put their homes and living arrangements first as their priority, and as such we’re now seeing an absolute explosion in activity across the UK property market.
According to data released by the Office for National Statistics (ONS) house prices across the UK rose 10% year on year between 2020 and 2021 and, for example, 15% just in the North West of England alone.
These sorts of increases haven’t happened for decades, and whilst many were quick to dismiss it as a release of pent up demand, or a result of the stamp duty holiday introduced in June 2020, however, the data that we’re now seeing from after these two events seems to indicate that the increase in demand and the shift in focus will be prolonged and significant.
With that in mind, one of the property investment options increasing in popularity the most is purchasing land to develop property. There’s more land worth developing than you may think, and due to that fact, we’re seeing an increasing number of enquiries and queries come through from clients looking to finance these types of land purchases with a loan.
Often, due to the fast paced nature of property development and purchasing land, we find that the best solution for many is a bridging loan, or a land bridging loan, which gives quick access to cash and flexible terms. Because we’re now finding ourselves arranging more and more of these types of land loans, we’ve put together a short guide for you.
What is a land bridging loan?
In short and simple terms, a bridging loan more or less does what it says on the tin – it’s a loan designed to bridge the gap between one stage and another. There are hundreds if not thousands of examples we might use for this, however, it’s usually a type of loan or finance used mainly in property.
To give a very basic example, if a client is looking to move house and is part of a chain, and wants to move to their next property before they’ve sold their own, then they can apply for a bridging loan to break the chain and repay it when they sell their own property.
How does bridging finance for land purchases work?
This will broadly depend on your circumstances and what you’re looking to do with the land. However, if we were to take a typical example, you might find a good opportunity for a piece of land to be able to purchase it and develop two residential houses but lack the full capital to complete the purchase and pay for the development of the land.
If you were to apply for a bridging loan, we’d take a look at your circumstances and help you put an application together before shopping the market of our panel of lenders and giving you some options. Our lenders would want to see your business plan, as well as the security you were offering and the time scales before putting together an agreement in principle. After that the final paperwork would be signed and, most likely, the funds would be released to you in stages. Once the properties had been built and completed, you’d use the sale of the properties to repay the loan, or you’d re-arrange longer term finance such as a Buy-To-Let mortgage.
Are land bridging loans difficult to obtain?
They can be. That being said, there are more specialist lenders coming to market looking for exposure to these kinds of investments and it’s becoming easier.
Most lenders and finance providers will consider these loans too risky as there can be many reasons why the project might not be completed. Rather than in traditional finance where your credit history and size of deposit are key, with these types of bridging loans you’ll find that the lender is more interested in your track record and business plan.
Bridging loan calculator
To help give you a broad idea of what this type of bridging loan might cost you if you’re considering buying land, we’ve put our handy bridging finance calculator below.
It allows you to put in the amount you think you’ll need as well as how long you think you’ll need it. The calculator will show you what you’d typically pay, so if you’re looking for a more accurate quotation it’s worth getting in touch with one of our brokers.
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What are the key features of bridging loans for land?
When it comes to arranging a loan for property development or such a large investment, you really need to know and understand exactly what it is you’re signing up for, and whilst a bridging loan may vary depending on its use and what you’re looking to do with it, bridging finance, by and large, has some prominent features and benefits that most clients look to use them for.
- Flexible
Again, in property and property development, and especially when it comes to land, we find that our clients require flexibility. In time, in terms and also in how they draw down the cash. These types of loan offer that flexibility
- Fast
In today’s market, one of its key features is that things move quickly, and so when you spot an opportunity to move then you need to know that you can access the capital you need in order to make the most of that opportunity. More often than not we can get clients an agreement in principle the same day.
- Specialist
Our panel of lenders have years of experience in these industries and so they know exactly what you need and what is required to be successful in this industry and they put emphasis on you as a developer rather than arbitrary credit scores.
What are typical bridging loan rates?
The rates that you’re likely to pay for bridging finance will depend on a number of variables, and so we’re only able to give you typical rates without speaking about your situation first.
That being said, much will be down to the Loan To Value (LTV) of the bridging loan. To find out in more detail what we can offer you call us on 0203 889 4403.
How much can I borrow?
Again, this is something that’s likely to depend on your circumstances, but typically our clients are able to take a bridging loan or bridging finance for anywhere between £250,000 and £25,000,000.
Can I get a bridging loan on land without planning permission?
Only in exceptional circumstances. As a general rule of thumb, the vast majority of lenders won’t consider lending against land that doesn’t at least have some type of planning permission. If you’re not even at the stage of applying for planning permission, then it’s something you need to discuss with a broker as the likelihood is that our panel of lenders would consider this far too risky.
Other financial products we can arrange finance for
Whilst bridging finance is certainly one of our most popular products, it may be the case that it’s not actually the right product for you and your circumstances. We’ll always ensure that we recommend the right product for you, and due to the fact we have years of experience in the industry, if we don’t feel that it’s right, we’ll recommend something else.
Second charge bridging loans
If you’ve got a primary residence or property that already has a mortgage, then you may be able to raise finance against it on a second charge bridging loan. Essentially this means that if you’re unable to repay your loan then the lender gets second priority on the asset. If it’s a house, for example, they may apply to recover the loan amount from your property.
This is a fairly specialist type of loan, but one that we have many lenders willing to accommodate you for.
Commercial bridging loans
If it’s commercial property you’re looking at funding, then we also have lenders willing to provide bridging finance for commercial property. Following the pandemic commercial property has become increasingly popular either as a change of use investment or to convert into residential property. If this is an investment you’re considering, then we can certainly look to arrange this.
Fast bridging loans
Regardless of your situation, we can help you with access to rapid bridging finance or a fast bridging loan. Because of our experience we’re able, in many circumstances, to arrange a bridging loan or bridging finance in a matter of days. We understand that for many of clients time is of the essence and it’s something we’re always able to help with.
Auction finance
As well as land, many property investors are now getting much more involved in property auctions, however, in most cases this requires a deposit to paid quickly and paperwork to be exchanged within a matter of days. In most cases mortgage companies simply aren’t able to move this quickly and so this is where we find ourselves helping out clients in the majority of circumstances to help them with short term capital gaps that emerge when buying at auction.
Speak to our brokers today regarding bridging finance for land
We’ve got an experienced and friendly team waiting and willing to answer your questions and run you through the process if this is something you’ve been considering.
Reach out to us today and we can get you in touch with one of our experienced brokers who can give you all the information you need.