The Ultimate guide to getting a Land Mortgage.
What is a Land Mortgage?
A Land mortgage allows you to buy a piece of land. Generally this is so that you can build property on it. The way a Land Mortgage works is you have a mortgage that not only allows you to buy the land but also funds the cost of buying the mortgage.
Of course there are other types of mortgage for Land, but this is the most common type. We detail some of the others below.
Can You Get A Mortgage On Land?
We are often arranging mortgages on Land. It works in much the same way as a residential mortgage in many ways. The affordability is calculated in a very similar way.
The biggest difference is how the money is paid out. Instead of one lump sum to buy your new home, you receive it in several chunks (Usually six). The first and most obvious is to buy the land initially. Once you have done this you will gradually receive more of the loan over the build time until you get to final completion.
The Different Types Of Land Mortgages
Self Build Mortgage
This is the most common type of Land Mortgages. Most people that want to buy land are doing so to build themselves a home. The mortgage comes as two parts. The first is an interest only option whilst you are building the property. This keeps your costs low as you are likely having living costs of living elsewhere during the build.
This type of Land mortgage allows you to buy a piece of land usually to grow food or keep animals. It is getting increasingly common that people want a small piece of land in order to live off the land.
This can be done either short term or long term depending on what you are looking to achieve. You may just want this in the short term and will eventually build a property on the land. Or it may be a more long term plan where you already have a home and just want somewhere to grow food or keep animals.
Woodland mortgages are popping up across the country with people wanting them for things like Forest Schools. You can’t usually build on these, but they are increasingly popular in recent years.
Land Mortgage Criteria
You are probably used to the low rates of a residential mortgage, or the higher rates of a commercial loan. A Land Mortgage sits in between. Starting as low 3.59% rates aren’t that extreme for a Mortgage. They can get high of up to 6% or more though.
It will likely come down to the usual things that will affect a mortgage:
Deposits And Loan-to-value
Deposits for a this type of mortgage might be lower than you think. Starting from 5% deposits you can get building quickly with a lower deposit.
This is comparable to residential mortgages with 5% deposits, but the rates are lower on residential mortgages usually.
Your affordability and credit history
As with any mortgage, when calculating how much you can borrow for a Land mortgage a Lender will take into account your deposit, any credit commitments, and your credit history.
Most lenders will lend up to 4.5 times your income for a Land Mortgage.
Land Mortgage Calculator
We don’t have a Land Mortgage Calculator. If we did it would take your income and multiply it by four and a half.
The reason we don’t have a Land Mortgage Calculator is it would not be very accurate. Some lenders lend more than others depending on your situation, your commitments, your dependents, your income etc.
We will however tell you for free. It will usually take around fifteen minutes to work out how much you can borrow and who is best to borrow it from.
Land Mortgage Lenders
The Land Mortgage lenders available aren’t the ones on your high street. We work with a few lenders that will offer products for this type of mortgage. Here’s a few of the lenders we work with:
- Newcastle Building Society
- Darlington Building Society
- Tipton Building Society
- Mansfield Building Society
- The Nottingham
- Chorley Building Society
- Loughborough Building Society
- Buckinghamshire Building Society
- Bath Building Society
- Furness Building Society
- Vernon Building Society
And more! We have a large panel of Self Build mortgage lenders. Therefore, this means we can help get the right mortgage to suit your needs.
Buying Land Mortgage
If you are simply looking at a buying land it may still be possible to get a mortgage without building on it. Whilst we specialise in the self build style mortgage there are certainly options that will allow you to buy land for other purposes as detailed above.
How Does A Land Mortgage Work?
A Self build mortgage works very similar to a residential mortgage. However, they have limitations on a few different parts.
- You will have a maximum loan to value on the purchase of the land and rebuild costs.You will usually also have a maximum loan to value on the final value of the property, which is usually lower.
- The funds are released gradually. With a normal mortgage the funds are released on completion. With a Self build land mortgage you will receive a sum of money to buy the land, and then further payments to fund the construction of the property on that land.
- Location – You may be limited by location, unlike residential properties some lenders won’t lend in some parts of the country.
How Much Do You Have To Put Down For A Land Loan?
For a self build Mortgage you would generally be looking at a minimum 5% deposit. This therefore gives you an initial loan to value on the purchase of land and build costs of 95%. You may then have a final loan to value that will need to be met which is lower at say 80% – 85% of the final value.
How Do You Find Out More About Getting A Land Mortgage?
If you’d like to know more about getting a Land Mortgage you can speak to one of our expert advisors by giving us a call, or filling in the contact form at the top of the page. No obligation, and no fee for the initial consultation.