How much can you borrow for a bridging loan on land?

There’s no limit. When you’re trying to get a mortgage on a property to live in, it’s all about your income. This isn’t about how much you earn. There’s no limit as long as you’ve got enough deposit.

As I said, the deposit might vary depending on what the land is and what it’s going to be used for. Is it commercial or residential? Does it have planning? Your experience is a factor too. There’s no one figure.

On a bridging loan, you’re going to borrow the money over 12 months, usually, although it can be longer or shorter. The lender factors in 12 months worth of interest and the fees within the loan.

Their gross loan – what they’re actually lending – might be 75% of the purchase price. But your net loan, after you’ve taken away the 12 months interest and fees, will be less than that. If the gross loan is 75%, your net loan will be around 70% or just under. You might need a 25% or 30% deposit at the start, but you don’t have to have all of the money to buy a project like this.

There’s no definitive answer. It depends on every case – and that’s why I like this business so much – every case is different. With the everyday mortgage lending we do, we tend to approach whoever’s got the right rate. But bridging is a lot more involved, and finding the right lender is more complex, because this case might be slightly different to the next one. It’s much more bespoke.

What other costs are involved with a land bridging loan?

If you’re new to this sort of thing, you might be surprised by the fees on a bridging loan – they’re more than a normal mortgage. That’s because they’re lending on things you can’t get a normal mortgage on.

Most bridging loans typically come with a 2% arrangement fee. Then you’re going to have a monthly interest rate, rather than an annual rate like a mortgage. The monthly interest rate can be anywhere 0.6% upwards, at time of recording in mid-September 2024.

You’ll generally have to pay the lender’s legal fees as well. That might be another £1,000 or so, and you’re generally going to have a valuation fee. Valuation fees are a bit more in-depth because the lender wants to know what the land is worth. Plus, there’s the future value if you build on it. That valuation fee will be a few hundred to maybe a couple of thousand pounds.

When you’re buying a normal property they can do an automated valuation – that doesn’t cost you anything, or might just be £100. But when bridging loan valuations get more complex, on land with planning and development values, I’ve seen costs of £7,000 for valuations on complex cases.

Generally, you need to pay the valuation fee upfront and the legal fees on completion. The arrangement fee can be added on to the loan. You might get a few hundred-pound admin fees here and there, as well.

How difficult is it to get a bridging loan for land and how do I get one?

It depends what it’s going to be for, what you’re going to do with it, who you are and if you have done it before. If we can tick a few of the boxes – you’ve developed property before and you’re pretty confident of getting planning for the land, it’s not difficult to get the bridging loan at all.

If you’ve never owned a property before and you just want to buy a field to ride your quad bike in, that’s going to be very difficult. There’s not much value in that land as it is and you’re not doing anything to make it any more valuable. A bridging loan probably isn’t right for you there.

But for developing the land it’s surprisingly easy. If you’ve got the deposit, the know-how and the inclination to make it happen, you just need to talk to me and I’ll help you.

How long does it take? How quickly can I complete?

We’ve seen deals go through within a couple of weeks. If it’s easy, it all stacks up and the valuation can happen quickly, a few weeks is fine.

I’ve also seen deals drag on and on, however. Perhaps valuation doesn’t quite go as planned and certain things happen – and it takes weeks or months.

In theory a bridging loan should be quick, and generally they are. But don’t expect to get the money in three minutes – it doesn’t quite work like that, despite some of the advertising headlines you might see.

What exit strategy should I use?

Exit strategy is the big one for a bridging loan. There’s got to be an exit. The lender will only lend if they know that you’re going to be able to pay off their loan within the 12 months.

Sometimes it’s shorter, or a bit longer, perhaps 12 to 18 months. The lender needs to know you’re going to repay this loan, so they need to be confident you’re going to get the planning.

We also need to think about what to do if we don’t get the planning. Would we get planning for a smaller or different project? We’ve got to know what we’re going to do with it. The exit strategy is very important.

The exit strategy depends on the plan. If it’s for your own personal use, that’s not an exit strategy. If we’re going to get the planning and then build on it, that’s an exit strategy and that’s generally going to be okay.

But the lender looks at how likely it is to achieve the exit strategy. If you’re doing something where everyone thinks you’re mad, they might think the same thing. But maybe you have means to pay off the loan at the end. Perhaps there’s equity in your own residence to pay off the bridge if needed, or there’s another property that we could use to refinance.

We don’t want to do those things at the start because they would take longer – we want the bridge. But if it all went out the window and we had to get the money from somewhere else, those are back-up exit strategies.

Possibly the most important part of a bridging loan is how you will pay it off. Because in 12 months time, that lender is going to want their money back.

What else do we need to know about bridging loans for land?

There isn’t a ‘comparethemarket’ for bridging loans. You can’t just find a lender that has the right rate and go to them. it’s completely bespoke.

One lender might have the right rate, but it might be reserved for a certain type of property, project or customer type. There might be things in your case that mean we can’t go there.

The right way to get a bridging loan is to go to a broker, because if you’re going to shop around yourself, you’re going to be there a long time. You need a broker to go and find you the right lender for your specific situation.

Some Bridging Finance is not regulated by the Financial Conduct Authority.