Land Mortgages

For established farms, estates and equestrian and rural businesses the barriers to mortgages for buying land are low – and we can help you overcome them.

But those who contact us wishing to purchase land for their own personal use or to set up their own new business enterprise, underestimate the complexities of financing it. It has its challenges and options are limited.

Many looking to buy a small acreage of land, are under the miscomprehension that they can access a small deposit/high Loan-to-Value (LTV) mortgage option with repayments based on personal income, but, unfortunately, such options are non-existent for land purchases.

Of the options that might be available for the purchase of land, be prepared to have to provide a sizeable deposit and expect to pay higher interest rates and fees than you might expect.

How we help

We can help you if:

• You are an established farm, equestrian or rural business purchasing more land;
• You will generate commercial income from your new land;
• The land has buildings, facilities and planning permission to undertake your planned new enterprise immediately;
• You have a deposit of at least 30% of the purchase price;
• You need to borrow a minimum of £100,000.

If you meet these criteria, please contact us and we’d be delighted to see how we might be able to help you.

We recognize navigating these financing options can be overwhelming. Our expertise lies in understanding these parameters and guiding you towards the most suitable solution for your specific situation.

Factors to consider

• A commercial focus: land is seen as a commercial asset by lenders. You must present a commercial lending case to access a mortgage from a high-street lender.
  Unfortunately, a small parcel of land for grazing or hobby-farming will not generate sufficient income to qualify for a mainstream commercial lender.
• Loan-to-Value (LTV) ratio: for land without a house or buildings, lenders typically require a higher deposit compared to land with a house or buildings. Expect a minimum deposit of 40% to 50% (compared to 15-20% for residential properties with land or 30% for a commercial mortgage).
• Income and serviceability: unlike residential mortgages that consider your personal income, commercial mortgages for land focus on the income the land will generate, and a few acres of land normally won’t generate the income required.
• Challenges for new ventures: accessing a mortgage for land can be difficult, especially for new businesses. Lenders are hesitant if affordability is based on forecast and unlikely to support those proposals that are dependent on planning permission.
• Other costs: it’s not just the purchase price to consider. Other costs need to be considered including set up fees, legal fees, valuation fees etc which in most cases cannot usually be added to your mortgage.
• Additional fees: as these cases aren’t straightforward, mortgage consultants like us will charge a fee for finding you finance. For a small parcel of grazing or hobby-farming land, the time spent sourcing finance and hence our fees could be high and disproportionate to the borrowing you require.

Understanding your options

Mainstream lenders are unlikely to be able to assist you. Other options could include:

• Alternative lenders:
  • Via specific lenders at 50% LTV requiring 50% deposit
  • Via other lenders at 60% LTV (minimum £100,000) requiring 40% deposit
  • These lenders offer higher interest rates (at around 10%-12%) and fees than traditional residential or commercial mortgage lenders.
• Second charge mortgages: in some cases, a second charge mortgage secured against your existing house can bridge the funding gap.
• A combination approach: you could explore a creative combination of the above options to reach your desired funding level.