Buying land for redevelopment is a common practice for property investors, yet if the land has no current planning permission it can be challenging to secure long term finance to fund the purchase.
Bridging loans to buy land provide a funding method for developers looking to buy sites with or without planning permission. The land can be used for any purpose, including building residential homes or commercial properties. Please note that Novellus Bridging are unable to offer loans against an individual’s personal place of residence.
These types of loans can also be used for buying building plots quickly, as it can take months for long term finance to be arranged. Building plots are usually sold quickly to developers, so interested parties need to act quickly. Bridging loans with Novellus can be approved on the day of application, which means they provide an ideal solution for quick land purchases.
Alternatively, a bridging loan can be used for the initial land purchase and then refinanced with a development finance product.
What is a land bridging loan?
A bridging loan for land is a type of loan used specifically to buy land which usually does not have any existing buildings established on it. This type of funding is a short-term option that helps bridge the gap while organising long term finance.
The land may have previously been used for a number of different reasons, such as equine or agricultural purposes, storage or wasteland. In these circumstances, the developer will be applying for a change of use. It may have certain planning permission already which needs amending to suit the developer’s plans.
Some mainstream lenders may not lend on land unless it has planning permission, so bridging finance can be a natural fit. Redevelopment finance or a self-build mortgage is usually then applied for, which is used to pay off the original bridging loan and commence the building project. They can be secured against the value of the land being purchased.
Novellus will also review land that has existing vacant premises that are currently not income baring.
Bridging loans can also be used to buy the land, obtain planning permission and then sell it on to another developer.
Why choose a land bridging loan?
The land purchase market is very competitive and when property developers find suitable land they need to make a quick purchase before another developer buys it instead. Bridging loans for land purchases can often be approved on the day of application, providing developers with the comfort and security they can deliver on any offer they wish to make. This security often puts them in a more favourable position with the vendor/selling agent.
Land can be sold at auction which is a quick process that demands an immediate deposit and the balance due with 28 days of purchase. Bridging loans allow developers access to cash quickly, thus helping to secure auction purchases.This timeline is often more challenging for mainstream funders to adhere to. With auction sales the assets often have complications or imperfections which can make criteria based lending difficult to satisfy.
It is also possible to take out the bridging loan in increments as the development progresses, rather than borrow all the money in one stage. This can save the developer money on the overall interest paid, as it is only payable on the money borrowed.
During the loan approval process, Novellus will ensure there is a good exit strategy in place. This may be achieved through selling the properties built on the land, or through long-term refinancing options.
Loan terms are generally between 6-12 months and at Novellus, the borrower can pay off the loan at any time within that period without incurring any early repayment fees (save for the interest payable during the repayment notification period).
Novellus looks at each application on a case-by-case basis, even if the land does not have any existing planning permission.
Find out more
To help discover the approximate costs involved with bridging finance use the online bridging loan calculator for guidance.
Novellus offers a stress-free application process. The best way to find out if you qualify is to call today on 0203 397 4871 or fill out our form below.