Bridging Loans for Land Purchase and Planning Gain
Good land rarely stays on the market for long, and mainstream lenders are often cautious about lending on a plot without planning permission. A bridging loan gives investors and developers short-term finance to secure land quickly, then time to work through the planning process. If planning is granted, the land's value may rise, and that uplift, often called planning gain, can open the door to development finance or a profitable sale.
How bridging loans for land purchase work
A bridging loan is secured on property, in this case the land itself, and sometimes on other property you own as additional security. Terms are usually counted in months, and the lender's main questions are what the land is worth today and how you will repay the loan at the end of the term.
Lenders tend to treat land in three broad categories:
- Land with full planning permission: usually the easiest to fund, because the route to development is clear.
- Land with outline planning or a strong prospect of permission: fundable, but lenders look closely at the planning position and your experience.
- Land with no planning: the hardest to fund on its own, so lenders may lend less against it or ask for extra security.
Using bridging finance to capture planning gain
The appeal of planning gain is simple: land with permission to build is generally worth more than the same land without it. Bridging finance lets you buy the site, carry it while you prepare and submit an application, and then exit once the position has changed.
Planning outcomes are never certain, so treat any uplift as a possibility rather than a promise. Before you buy, it is sensible to:
- review the local plan and any planning history for the site;
- take advice from a planning consultant on the likely prospects;
- allow realistic time for the application and any conditions; and
- make sure your loan term leaves a buffer if a decision takes longer than expected.
Costs and fees
Interest on bridging loans is charged monthly, typically between 0.4% and 1.5% per month depending on the site, the loan-to-value and the exit. Arrangement fees are usually 1–2% of the loan, and you should also allow for valuation, legal costs and any exit fee.
Because land usually produces no income while planning is pending, many borrowers choose to roll up or retain the interest so there are no monthly payments, and repay everything at the end. This makes the total cost higher than paying monthly, so it is worth comparing both. Our bridging loan calculator shows the difference in a few seconds.
Timescales and eligibility
A decision in principle can often be given within 24 hours, and completion can happen in as little as 7 days where the valuation and legal work are straightforward. Land deals can take longer if the title is complex, there are access or boundary questions, or searches raise issues.
Lenders will want to understand the site, the purchase price, the planning position, your experience of similar projects and, above all, your exit. Loans typically range from £25,000 to £25 million.
Exit strategies for land bridging
- Refinancing to development finance: once planning is granted, many developers move onto a facility that funds the build. Our construction finance service covers this stage.
- Selling the site with planning: some investors sell to a developer once permission is in place.
- Sale of other property: repaying from the sale of another asset can also be a valid exit.
Whichever route you choose, have a back-up plan in case planning is refused or delayed. If you are also buying or refinancing other property, see our property bridging loans page.
Frequently asked questions
Can I get a bridging loan on land without planning permission?
It is possible, but lenders usually lend less against land without planning and may ask for additional security. Land with full or outline permission is generally easier to fund.
What is planning gain?
Planning gain is the increase in a site's value that can follow when planning permission is granted. It is not guaranteed, because planning decisions can be refused or delayed.
How long can I keep a land bridging loan?
Bridging loans are short-term and usually run for a matter of months. Choose a term that allows for the planning process plus a buffer for delays.
Do I have to make monthly payments on a land bridging loan?
Not necessarily. Interest can be rolled up or retained and repaid at the end, which suits land that produces no income, although it increases the total cost.
If you would like to talk through your plans, our specialist Adam at 07973 197535 can help, or you can send us your details through our contact page.