Found a plot with planning permission and the seller wants a quick completion? Banks rarely lend on bare land, and development finance usually comes later, once your build is mapped out. That leaves a gap, and bridging finance is how most land buyers cross it.
Here’s how a land bridging loan actually works, what lenders care about, and how planning status changes your options.
Why Land Is Harder to Finance Than a House
A house has walls, a roof and a rental or resale history. A plot has potential. Standard mortgage lenders don’t like lending against potential, so land purchases usually fall outside their criteria.
Specialist bridging lenders are more flexible. They look at the land’s value, its planning status and your plan for repaying the loan, rather than expecting the land to produce rent. That’s why bridging finance for land is a common route for developers, builders and property investors.
The Planning Ladder: Why Status Matters So Much
Planning status is the single biggest factor in how a lender views your plot. Think of it as a ladder, where each rung makes the deal easier to fund.
Rung 1: No Planning
Land with no permission is the highest risk. Some lenders will consider it, but expect lower loan amounts, higher costs and a strong requirement for a clear plan.
Rung 2: Outline Planning Permission
Outline permission confirms the principle of development, but details still need approving. Many lenders will fund this, particularly where the site, location and proposal look strong.
Rung 3: Full Planning Permission
Full consent shows exactly what can be built. Lenders usually feel most comfortable here, which can mean better terms and a wider choice of land acquisition finance.
Permitted Development Rights
Some sites can be developed without a full planning application. Lenders will usually want evidence that those rights genuinely apply, so have your paperwork ready.
How a Land Bridging Loan Works, Step by Step
- You agree the purchase and share the site details, planning documents and your intended plan with a bridging finance broker.
- The lender values the land. The valuation looks at what the plot is worth today, and sometimes at its value once developed.
- Terms are offered. You’ll see the loan amount, interest, fees and term, which is usually between 6 and 24 months.
- Funds are released at completion, often within a couple of weeks once the legal work is done. Fast bridging finance exists for tighter deadlines.
- You exit the loan by selling the land, refinancing, or moving onto development finance.
How Much Can You Borrow?
Loan to Value (LTV) on land is often lower than on a standard house, because land is harder to sell quickly if things go wrong. Lenders commonly lend a smaller proportion of the land’s value, and the exact level depends on planning status, location and your experience. Your broker can tell you what’s realistic before you commit to the purchase.
What Does It Cost?
Costs vary by lender and deal, but typically include:
- Monthly interest, commonly between 0.55% and 1.5%, often rolled up and paid at the end
- Arrangement fee, typically 1% to 2%
- Valuation and legal fees
- Possibly an exit fee
Always compare the total cost across the whole term, not only the monthly rate.
Your Exit Strategy: The Part Lenders Ask About First
Bridging loans are short-term by design, so lenders want a believable way to repay. For land with planning, the usual exits are:
- Sell the land, with the added value that planning permission brings
- Refinance onto development finance to fund the build
- Sell the completed development and repay from the proceeds
- Refinance onto a longer-term mortgage if the finished property will be held
If development funding is your next step, it helps to plan it early. Our guide to development bridging finance covers how funding for the build itself works.
Regulated or Unregulated?
Land bought for development or investment is normally covered by unregulated bridging loans. Regulated bridging loans apply when the loan is secured on a property you or a close family member lives in. Your broker should confirm which applies before you proceed.
Common Mistakes With Land Bridging Loans
- Assuming planning means approval. Check conditions attached to the permission and when it expires.
- Having no exit plan. Delays happen, so build in a buffer.
- Underestimating costs. Fees, legal work and interest all add up.
- Applying to one lender. A broker comparing the market often finds better terms.
Getting the Right Help
A good broker will ask about your planning documents and exit before talking about rates, and will tell you honestly if bridging isn’t the right fit. Discount Mortgages can search the market for suitable bridging finance for land with planning, and talk through your exit strategy before you commit to anything.
FAQs: Bridging Finance for Land with Planning
What is bridging finance for land with planning permission? It’s a short-term loan secured on land that has outline or full planning permission, used to buy or refinance the plot while a longer-term solution is arranged.
How long does a bridging loan take? Many complete in around two to three weeks once paperwork is ready, and quicker options exist for urgent cases. Timing depends on the lender, valuation and legal work.
Who can apply for bridging finance? Developers, builders, property investors, limited companies and individuals can apply. Lenders focus on the land, its planning status and your exit strategy.
Can I get bridging finance with bad credit? Often yes. Because the loan is secured on the land, some lenders will consider applicants with credit issues if the site and exit plan are strong. Terms may differ.
What is the maximum LTV for a bridging loan on land? It’s often lower than on a house and depends on planning status, location and the lender. Your broker can give a realistic figure for your plot.
How much does bridging finance cost? Monthly interest is commonly between 0.55% and 1.5%, plus arrangement, valuation and legal fees. The total depends on loan size, term and lender.
Is bridging finance regulated? Only when secured on a property you or a close family member lives in. Land bought for development or investment is usually unregulated.
When should I use a bridging loan for land? When you need to complete faster than traditional finance allows, such as an auction or a motivated seller, and you have a clear exit like a sale or development finance.
Final Thought
Land with planning permission can be a strong opportunity, but only if you can complete before someone else does. A land bridging loan, paired with a clear exit, lets you secure the plot now and arrange the long-term funding afterwards.
Bridging finance is subject to status, valuation, lender criteria and affordability checks. Your property, land or security may be repossessed if you do not keep up repayments on a loan or mortgage secured against it. Commercial mortgages, including bridging finance and buy-to-let mortgages, are not regulated by the Financial Conduct Authority.