Bridging Finance To Buy Land

Looking for a bridging loan to finance a land purchase?

We can provide

• Market leading bridging loans from £50,000 to £100m
• Rates from 0.55% pm
• Lower rates for £1 million+ loans
• Terms from 3 months to 3 years
• LTVs up to 80% (can be more if other assets in the background)
• Interest roll up options
• Bridging finance for business purposes (purchasing land or new premises, deposit for new purchase, business growth)
• We provide a friendly, professional service to help you get the money you need at the best available rates

Call us on 0117 959 5094 to discuss your requirements.

Find the Perfect Bridge Loan to Buy Land

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With a structure centred on land or property as security and a well-defined exit strategy, bridging finance provides a solution to many of the challenges in property development.

At Clifton Private Finance, our expertise in bridging finance has helped land developers, entrepreneurs, and individuals looking to build their own homes obtain the land they need to get their project off the ground.

Key Takeaways

• Bridging finance gives you fast access to capital, helping you move quickly on land-buying opportunities.
• Whether you’re purchasing land with or without planning permission, bridging finance offers flexible and powerful funding.
• It’s suitable for individuals looking to build their own home, as well as businesses making strategic development projects.
• Partnering with Clifton Private Finance gives you the best chance at securing cost-effective, well-structured funding.

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What is Bridging Finance?

Bridging finance, so-called because it ‘bridges the gap’ between a need for capital and traditional long-term finance, provides rapid access to significant funds needed to make property or land purchases without delay. Other forms of suitable funding, such as development finance or mortgages, is often too slow to put in place before opportunities are lost, making bridging finance the perfect companion to other funding for those seeking money up-front.

At Clifton Private Finance, we specialise in bridging finance for many different types of property acquisition. Learn more about the basics of bridging finance with our in-depth Guide to Bridging Loans.

Why Use Bridging Finance for Land Purchases

Bridging finance is not the only option for those looking to buy land. Mortgages, including self-build mortgages, and development finance for businesses looking to build new housing or commercial property are both trusted products for land purchases. So why use short-term bridging finance?

Bridging finance’s has two clear advantages. The first is that it is fast, able to be put in place extremely swiftly, often within 5-7 working days. The second is that it is flexible, with a different set of criteria for application and approval. This makes bridging finance perfect for:

• Buying land at auction - The speed of bridging finance means it will be in place before the 28 day deadline for full payment that’s standard at auctions.
• Purchasing land from sellers who are looking for cash buyers - Some sellers are looking to make a sale quickly and aren’t interested in becoming part of a complex property chain.
• Obtaining land prior to full planning permission being granted - Planning permission is a key part of land value, and bargains can be found by buying land before planning permission is in place.
• Ensuring ownership of land before securing development funding - Development funding can take time. Bridging can make sure you don’t lose the land you’re seeking to another developer while you’re waiting for the final funding approval.
• Buying land without mortgage-like affordability and stress testing - Mortgages require a comprehensive analysis of your income and ability to make monthly repayments. With its alternative structure, bridging finance is not so limited, providing flexibility to buy when other finances don’t meet mortgage lender requirements.
• Taking advantage of opportunities that arise at short notice and may be snapped up by another - In many areas across the UK, land changes hands quickly, with other developers keen to speculatively invest, or begin projects of their own. Bridging finance provides the speed necessary to move quickly and grab opportunities before others move in.
• Buying land now while waiting for other investments to sell - If you are moving other investments, such as property, other land, or company shares to purchase the new land, you may want to move on the new land development before those other assets are sold. Bridging finance holds the solution, bridging the gap between your need for capital today, and your assured sum coming to you tomorrow.

Using bridging finance puts the power in your hands to make the most of the UK land marketplace.

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Land Type, Planning Permission, and The Effect on Bridging Finance

Not all land in the UK is the same, and the type of land you are planning to buy will have a significant impact on your bridging finance. Lenders are keen to provide funding for viable investments that show a proven return, rather than hopeful speculative land purchases with a flimsy exit strategy.

Planning permission is another significant consideration. Developments with existing planning permission form more stable securities than those that don’t.

How does this affect bridging finance?

• Higher interest rates - Land that is purchased more speculatively (without development potential or planning permission) will be subject to higher interest on the bridging finance to represent the greater risk for the lender.
• Additional securities required - In many cases, the land itself is not sufficient to secure the capital required, which means other securities (typically property) will be needed to obtain the loan.
• Lower LTV - The overall loan-to-value rate of the loan may be lower if the land is not seen as a strong investment.
• Bridging rejected - In some cases, bridging finance will be difficult to obtain. Working with specialist lenders and an expert broker, such as Clifton Private Finance, will help mitigate this challenge.

The following table describes land types, planning expectations, and the impact on bridging finance:

Bridging Finance Viability by Land Type

When buying land, it is important to consider a range of factors which will affect your development. These include:

Planning permission - This may be either outline or full planning permission. Outline planning permission means the land is good for that use in principle, but no specific plans are in place. For example, residential land may have outline planning that states homes may be built there but with no full plans detailing the type of houses and their layouts. Outline planning permission is typically good enough to secure a competitive bridging finance deal.

Access - The road network should extend to the land you wish to buy and you will need legal access to the main highway. A strip of land between your site and the road that is owned by someone else is considered a ‘ransom strip’ and can end up costing you heavily if you don’t manage to buy it.

Service infrastructure - Water, electricity, waste plumbing, and gas are all important to consider when choosing your plot. The absence of these will lower the value of the land and its acceptability as security for the bridging finance.

Contamination - Especially relevant for brownfield land, contaminated land has hazardous substances in the soil, groundwater or the surrounding environment. This must be cleaned (remediated) before any development can be started. Remediation is an expensive undertaking that must be factored into the finance and a full contamination assessment is often required for suspect land before bridging is approved.

RICS Red Book valuation - A professional valuation done by a chartered surveyor will be essential. The ‘Red Book’ valuation shows that the high standards of the Royal Institute of Chartered Surveyors (RICS) have been met, providing a formal valuation that the lender will use when assessing the bridging finance. Note that a RICS Red Book valuation is likely to differ from the asking price of the land as an estate agent’s informal valuation will be subjective and often optimistic.

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Bridging Finance for Land and Construction

In some circumstances, bridging finance may be wanted for both the land purchase and to fund the full construction project. This may be part of a self-build project or for business level development. In these cases, architectural plans for the property and full planning permission are expected.

Bridging to both buy the land and pay for construction benefits greatly from specialist broker consultation. At Clifton Private Finance, our bridging finance team will work with you throughout your project to get you the level of funding you need. Contact us now to speak to a professional advisor for more information.

Land Bridging Finance Criteria

Like other forms of bridging finance, land bridging is based around the two main components of security and exit strategy. Land bridging can be a little more complex, with lenders seeking additional information to show business viability for the investment, including your experience and track record as a developer and the land development viability criteria described above. Working with an experienced broker to secure your bridging finance is essential. Clifton Private Finance are here to work with you at every stage of the process - speak to an advisor today.

Exit Strategies for Land Bridging Finance

Land is typically purchased for development purposes, though it can also be purchased as a longer term investment as part of a ‘land bank’. Exit strategies, therefore, tend to be:

• Development refinancing - Development finance may be inaccessible at the point of purchase (planning permission not yet in place, funds needed faster than development finance can provide) but it is often the long-term plan when constructing buildings on the land. In this way, it forms the exit strategy, clearing the bridging finance in full once it can be put in place.
• Self-build mortgage refinancing - Individuals planning to build a home on the property typically move to a self-build mortgage once the land is acquired and construction can begin. Similar to development finance, the self-build mortgage may have been unavailable initially but work well as an exit strategy a few months later.
• Traditional mortgage refinancing - A traditional mortgage often requires any home development to be completed before it can be applied for. This is a legitimate exit strategy when the bridging finance has been used for both the land purchase and the construction stage of the project.
• Development sale - If part of a larger development, the bridging exit terms may be structured for repayment once the full development is completed and the properties are sold. This may be both when the bridging finance is used for both the land purchase and the development phase, and when the bridging finance is used solely for the land purchase, and secondary development finance is sought for the construction.
• Sale of additional properties - The bridging may be backed by equity in additional properties, such as a family home in the case of a self-build project, or other investments in a development cycle. With an exit strategy based around their sale, the bridging finance is cleared once proceeds from those property sales are available.
• Sale of other assets or investments - Bridging is often secured to ensure the maximum return when selling other assets. The exit strategy is then centred around the monies raised through shares or asset liquidation.

Securities for Land-Purchase Bridging Finance

When obtaining bridging finance to buy land, the primary security is the land. As described above, this will be valued professionally by a chartered surveyor, resulting in a formal valuation.

Depending on the type of land and the planning permission in place, lenders will typically offer loan-to-value ratios from 40% (no planning permission, low value land) to 80% (land with clear development potential and planning permission). To compete purchase of the land, either a deposit is required, or additional securities can be offered. These may be:

• Other properties
• Other land
• Share-based investments
• Other high value assets (such as industrial machinery, specialist equipment, or personal collections including classic cars or fine art)

In some cases, it can be beneficial to leverage the bridging finance purely on alternative securities, ignoring the land value. This may be by securing the bridging finance entirely against your home; secondary properties, such as rental properties or holiday homes; or personal assets including shares. Businesses may use assets such as property owned, high-value machinery, or vehicles.

When you secure your land-purchase bridging finance against other solid assets and combine it with a confident exit strategy, the lender will put significantly less emphasis on the quality of the land or planning permission, making the acquisition of brownfield or agricultural land possible.

2 Examples of Security for Bridging Finance to Buy Land

Bridging Finance for Residential Land

Harold plans to build his own home on a plot of residential land with an auction guide price of £950,000. It has full planning permission in place for a five bedroom house that fits Harold’s requirements for his family. As the land is to be auctioned, Harold needs bridging finance to meet the strict 28-day deadline requirement of the auction house. Harold currently has 70% equity in his current £1.2M house, which he will sell when he moves. He has prearranged a self-build mortgage for £1.5M that will be used as the bridging exit strategy and to pay for construction of his new home.

Harold wins the land at auction for slightly above the guide price, at £980,000. He pays £98,000 from his savings, and comes to Clifton Private Finance for bridging finance of £882,000.

The chartered surveyor’s final valuation on the land is £1.1M. Harold is happy that he’s already made a good investment. Based on the quality of the land and the planning permission, the lender is willing to offer Harold a loan of 80% LTV on the property, representing a total of £880,000. Harold had expected to need to use his home as additional security, however, the strong valuation on the land has provided him with the borrowing power he needed to proceed without it. He pays the remaining £2,000 from his savings and secures the land.

Harold’s self-build mortgage is finalised in eight weeks. He pays off the bridging loan after only three months, minimising the interest, and comfortably begins his self-build project.

Bridging Finance for Brownfield Investment

BBB Development Ltd. are offered an opportunity to buy an area of land that was once a petrol station close to the city centre. Because of the difficulty in repurposing the brownfield land BBB are able to buy it at a very enticing price. They have been offered the land for £130,000 if they are willing to complete the deal within a month. BBB believe that with the right development, they could turn the land into four residential homes valued at over £400,000 each. The land has no planning permission and is in a very poor condition with possible contamination.

BBB work quickly. They do their research and find that remediation can be completed for a cost of around £60,000 to £80,000. This includes soil excavation and removal of old fuel tanks, groundwater and soil monitoring, and the safe disposal of hazardous material to meet all environmental regulations. Anticipating potential problems, BBB decide to look for £250,000 of bridging finance. This will give them the money to buy the land and complete the remediation. With considerable development experience, BBB are confident that once the ground is clean, planning permission for residential properties will be easy to obtain, and that they can apply for development finance as an exit strategy.

BBB approach Clifton Private Finance with their plan. Because of the risk on the brownfield site, including a somewhat speculative exit plan, the lenders are only willing to offer 50% LTV in bridging finance, representing a total of £65,000. Working with Clifton’s advisors, BBB decide to use some of their other properties as security, leveraging two rental properties in addition to the new land. These properties already have mortgages tied to them, but even on a second-charge basis, the lender is comfortable offering 65% LTV against the remaining equity. The calculations are as follows:

Property	LTV	Equity Valuation	Security Consideration
New brownfield land	50%	£130,000	£65,000
Rental home	65%	£160,000	£104,000
Rental flat	65%	£95,000	£61,750

Together, the properties provide enough security to pass the £250,000 loan required. BBB accept the bridging finance and purchase the land. The remediation takes four months, during which BBB put together architectural plans for their proposed small housing development. Unfortunately, it comes in over budget, at £110,000, but the buffer that BBB had accounted for means this can be covered. They seek planning permission for the residential development on their new cleaned land and it is granted three months later.

A new RICS Red Book land valuation comes in at an impressive £800,000. With this new security, BBB work with Clifton Private Finance to obtain new development finance that provides enough to repay the full bridging loan and fully fund the construction phase of their new development.

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Potential Risks & How to Avoid Them

Buying land with bridging finance is not without risk. Working with Clifton Private Finance will help you avoid problems and minimise risk. Some common problems include:

• Planning permission delays or refusals - Taking out bridging finance to buy land with the belief that planning permission will go through smoothly can be risky. There is no guarantee of planning permission as there are many factors that go into the decision making process. Delayed planning permission can increase the costs of your bridging finance, while refused planning permission can derail your project entirely.
• Overestimated resale value - When relying on a final sale as the exit strategy, it’s important to be conservative in your estimate. Estate agents will be optimistic about the value you can sell land and property, so be sure to factor in their enthusiasm!
• Depending on uncertain events - Known as ‘hope valuations’, when you depend on the right circumstances occurring to make your land purchase project a success, you increase the risk of problems. As with overestimating the resale value, gambling on unknown events isn’t recommended. Examples include buying land because you believe a major corporation will move to the area, increasing the value of residential properties, or buying brownfield land expecting that it will treble in value when remediated.
• Construction delays - Construction delays can add cost directly to your project, as well as increasing the interest you will pay on your bridging finance. Factor in a buffer for unexpected delays.

Buying Land with Bridging Finance from Clifton Private Finance

At Clifton Private Finance, we have the expertise you need for a smooth land purchase. We can:

• Help you structure a deal using multiple securities.
• Match you with a lender who understands your plans for the land and further development.
• Set up refinancing exit strategies with mortgage lenders or development finance.
• Smooth the application process.
• Use our experience to advise you on risk assessment.

To get the funding you need to cross that bridge and buy land today, call Clifton Private Finance.

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