Tag Planning Permission

Tag Planning Permission

Can I get a mortgage to purchase a plot of land?

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Time to state the obvious, when you’re planning to build your own home the first thing you need to secure is the land to build on.  The question is can you get a mortgage to help you buy the land?

The answer is… maybe. You’re beginning to wonder why you’re reading this aren’t you? But stick with it.

Most Self Build Mortgage lenders want you to get your build to at least foundation stage prior to releasing any monies. However there are lenders who will allow you to purchase or release funds from the value of the land.  There are, as you might guess, a few stipulations and expectations.

What makes a site suitable security for a mortgage?

Note that I asked what makes a ‘site’ suitable security for a self build mortgage and not simply ‘land’.

First of all  lenders will expect that the site has full Planning Permission and normally passed Building Control before they will lend a penny. For those buying a property will Planning already approved it’s worth noting that lenders are not keen on lending to purchase a property only to have the plans resubmitted for further changes.

How much will they lend?

It depends on the lender on how much they will release however a good rule of thumb would be between 50-75% of the value of the plot of land. For example if your plot values at £100,000 then you could get anywhere between £50-75,000.

What is a Self Build Mortgage?

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A Self Build Mortgage is a mortgage loan generally secured on a site, run-down property or barn conversion with full Planning Permission and Building Control.   The loan is based on the current and end value of the property.  Money is released in stages as the build progresses and rarely exceeds 75% loan-to-value* (LTV).

Each Self Build Mortgage lender has individual views on the risks involved and generally structure their offering accordingly.  Therefore careful research is required before applying for a mortgage.

*Loan-to-value is the ratio of mortgage debt to property value i.e. if the mortgage is £100,000 and the end value of the property is £200,000 then the LTV is said to be 50%