Can mortgage be secured for land lacking building development approvals?
Land without planning permission can make securing a mortgage more challenging, but it's not impossible. Here's what you need to know.
Firstly, it's essential to understand that most mortgage lenders prefer applicants with relevant planning permission. This is because it strengthens the application and improves the chances of approval, as well as offering better loan-to-value (LTV) rates. However, some lenders may consider applications without planning permission if you can provide strong evidence of your ability to repay and possibly extra collateral or security.
If planning permission is not granted, your options include seeking lenders willing to offer financing without planning permission, but expect higher deposits and interest rates or more stringent requirements. Another option is to consider specialized mortgage brokers who can help navigate lenders that offer land mortgages without full planning consent.
If your application is rejected, you might need to secure planning permission before reapplying or explore alternative financing options like cash purchase or selling the land as-is. It's also possible to apply for a regularisation certificate through local council building control, but remedial actions might be necessary if compliance issues arise.
Engaging with the local planning department can provide insight into the likelihood of obtaining planning permission. Some lenders, such as self-build lenders, will assess applications with outline planning permission. A self-build mortgage with a high LTV ratio could be achievable once full planning permission or Class Q is granted.
It may be beneficial to wait until planning permission is granted before applying for a mortgage. Paying cash for the land and then getting a mortgage is an option for a self-builder, but it requires planning permission to be achieved first. Building a home on a garden plot is another alternative option, provided you can get planning permission and your own property has space.
Lending on land without planning permission is seen as risky and results in higher interest rates. Fewer lenders are willing to lend without planning permission, resulting in less competitive rates.
Mark Harris, the chief executive of SPF Private Clients, an award-winning financial services intermediary, advises that it is advisable to consult brokers or lenders experienced with land and self-build mortgages to find suitable options. SPF Private Clients was part of the launch team of the company as Savills Private Finance in May 1997 and has grown into one of the market leaders in UK financial services.
Paul Blaking, the direct mortgages manager at Suffolk Building Society with over 12 years of experience in financial services, also emphasizes the importance of consulting a mortgage broker who specializes in land and self-build projects.
In summary, while securing a mortgage for land without planning permission can be challenging, it is possible with the right approach and the right lender. Consulting a mortgage broker who specializes in land and self-build projects is recommended to find suitable options.
- Most mortgage lenders prefer applications with relevant planning permission due to stronger applications, improved approval chances, and better LTV rates.
- Without planning permission, options include seeking lenders offering financing without planning permission or working with specialized mortgage brokers who deal with land mortgages without full consent.
- Rejected applications may require securing planning permission before reapplying or exploring alternative financing options such as cash purchase or selling the land as-is.
- Engaging with the local planning department can provide insight into the likelihood of obtaining planning permission, and self-build lenders may assess applications with outline planning permission.
- Waiting until planning permission is granted before applying for a mortgage, paying cash for the land and then getting a mortgage, or building a home on a garden plot are alternatives, but each requires planning permission first.
- Lending on land without planning permission is riskier, resulting in higher interest rates and fewer competitive rates due to fewer lenders willing to lend without consent. It's advisable to consult experienced mortgage brokers or lenders specializing in land and self-build mortgages to find suitable options.
