Land loans: Financing a land purchase in the UK

Find out how to get a loan to buy land in the UK and what you need to watch out for.

Your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured on it.

It’s possible to get a loan to buy land, either by securing the loan on the land or on another asset, or by applying for an unsecured loan.

What is a land loan and how does it work?

As the name suggests, a land loan provides you with money to buy a plot of land. Similar to other types of loans, a land loan lets you borrow a fixed sum of money that you repay to the lender, plus interest, in monthly instalments over a set term.

A piece of land is seen as riskier collateral for a loan than property, because it can be harder to value and to sell, so interest rates for land loans can be higher compared to traditional loans or residential mortgages.

According to figures from the National Custom and Self Build Association, 1 in 3 people are now interested in building their own home. However, buying land to build on can be expensive, and as a result, most of us would need to borrow to make that dream a reality. A land loan is one way to do this. However, a self-build project isn’t the only reason to buy land… you may want a bigger garden, or perhaps you’re buying a parking space – there could be any number of legit reasons.

Can you get a loan to buy land in the UK?

Not every lender will be willing to offer you a personal loan to buy land in the UK. You will need to demonstrate to the lender that it’s a worthwhile purchase, and that you’ll be able to repay the loan.

Which type of loan is best for land purchases?

There are a number of options to explore when financing your land purchase:

Personal loans

Personal or unsecured loans allow you to borrow a fixed sum over a set term, usually between 1 and 7 years. You won’t need to use the land or any other asset as collateral, which means you don’t need to worry about losing that asset if you can’t keep up with your loan repayments.

But on the flip side, you may be limited in how much you can borrow. You can typically apply to borrow up to £25,000, depending on the lender.

For larger land purchases, this is unlikely to be enough. But if you’re just buying, say, a parking space, or a few metres of land from a farmer, then a personal loan might cover it – as long as you can find a lender to offer you the loan, with repayments you can afford. Your monthly repayments may be higher with a personal loan than with other financing options, as the interest rates may be higher and you will have to repay your loan within a shorter time.

Check your eligibility with a range of lenders

Secured loans

If you use a secured or “homeowner” loan, you secure the amount borrowed against an asset. This could be your home, or it could be the land itself.

This is riskier for you than a personal loan, because if you don’t keep up with your repayments, the lender can force you to sell the asset to recover its funds.

However, this security also reduces the risk for the lender, which means that, compared to personal loans, you can usually borrow more, interest rates can be more competitive, and terms can be longer – sometimes as long as 25 years. Secured loans can also be more accessible for those with poor credit ratings, but because of the risk to the asset you’re using as security, it’s very important than you only apply if you’re confident you can keep up with your repayments.

Compare secured loan quotes for your land purchase

Bridging loans

Bridging loans are a type of short-term finance that can be used to purchase land quickly. This can be a flexible way to borrow, with loan terms varying from 1 month to 3 years, depending on the lender.

Most bridging loans come with higher interest rates than traditional mortgages, usually advertised as the rate per month. For example, if the rate advertised was 1.5% a month, this would translate to an APRC of 18%. However, the beauty of bridging loans is that you don’t generally make monthly repayments, instead paying a lump sum at the end of an agreed term (such as the end of a construction project).

You can typically borrow upwards of £25,000, but you’ll usually only be able to borrow a maximum loan-to-value (LTV) ratio of 75% of the value of the land. Some lenders may allow you to borrow at a higher LTV if you have additional assets to use as security.

Compare bridging loan quotes for your land purchase


Land loans usually only have terms of 2 to 5 years. But if you’re getting a loan to buy land and build a house on it, you might be able to apply instead for a self-build mortgage that offers a term of 25 to 30 years.

How to get a loan to buy land

As with choosing any loan, you’ll need to compare your options carefully and then select the loan that best meets your requirements.

When applying for a land loan, you will need to provide the following details:

  • Your full name
  • Your current and previous addresses
  • Your date of birth
  • Your job title and employer
  • Your salary and household income
  • Other financial commitments, such as a mortgage or credit cards

How easy it will be to get a loan depends on a number of factors, including local regulations in your area, the amount of land you want to buy, and what you’re planning to do with it.

It’s usually easier to borrow money for land that you plan to build a home or business on, particularly if you’re going to build somewhere to live, rather than to buy undeveloped land with no real plan of how to improve it. So you can improve your chances of approval for a land loan by going into the process with a specific piece of land in mind, and a solid plan for what to do with it.

Bear in mind that the process of applying for planning permission can be expensive, and that a lender will want to be certain that you can cover those costs alongside your loan repayments.

What can I use a land loan for?

You may be able to use a land loan for any of the following purposes:

  • Residential: buying land to build your home.
  • Recreational: if you want to own land on which to do outdoor activities like fishing or hiking.
  • Agricultural: buying land to use for farming.
  • Commercial: if you need land to build properties for your business. This might include mobile home land financing, if you want to own a site for mobile or static homes or caravans.

Can I get a mortgage for a land purchase?

Yes, you can get a mortgage for a land purchase, although it’s usually better to approach a specialist lender than your high-street bank. Keep in mind that the more you can stump up for a deposit, the more likely you are to get accepted.

If you apply for a self-build mortgage, you will usually receive your funds in stages as different parts of the build are completed. Lenders prefer this over giving you one lump sum to reduce the amount of risk they take on and to make sure you spend the money as planned.

Example: Andrea and Mark

Andrea and Mark have found a plot of land costing £150,000 that they wish to buy and build their dream home on. They have £30,000 in savings to use and want to borrow £120,000 with a land loan. They both earn £35,000 a year. They take out a secured land loan over 20 years with an APRC of 8.5%, giving monthly repayments of £1,011.21.

* This is a fictional, but realistic, example.

Can I get a land loan with bad credit?

You’re more likely to get accepted for a land loan if you have a good credit score. That doesn’t automatically mean you won’t get accepted for a land loan if your credit score is poor, but it does mean your choice of lenders is likely to be reduced. It’s also likely you’ll pay a higher rate of interest and you may have to borrow a smaller sum of money.

What to consider before you borrow money to buy land

Before borrowing money to buy land, it’s sensible to keep the following in mind:

1. Know what land you’d like to buy

Going to a lender without knowing which land you plan to buy is likely to result in a rejection.

2. Opt for land with planning permission in place

Lenders will view land that already has planning permission for development as lower risk, so they may be more willing to lend you money. You can also apply for planning permission before buying land, which will give you peace of mind that you can develop the land if needed.

3. Improve your credit rating

The better your credit score, the more likely you are to be accepted for a land loan and to qualify for more favourable interest rates. So if your credit score is low, take steps to improve it: check you’re on the electoral roll, correct mistakes on your credit report and make sure to pay your bills on time. Read 10 ways to improve your credit score for more tips.

4. Develop a plan for the property

Prepare a substantial plan for your property, including your estimates of costs and timeline for building on the land. Make your plan specific to your needs: for example, if you’re planning a farm, include costs for purchasing livestock, seed and farm equipment.

Where can I borrow money to buy land?

  • Banks. You may be able to get approved for a loan with most major banks, provided you meet their lending criteria and can provide a detailed plan for what you want to do with the land.
  • Online or alternative lenders. Non-bank lenders may be more flexible in lending money than their traditional counterparts.
  • Owner financing. If you don’t believe you’ll be approved for a loan, you may be able to negotiate a payment plan directly with the current owner of the land.

Pros and cons of land financing

  • You’ll have the opportunity to build the home of your dreams or run your business on your own land.
  • Choosing a ready-to-build lot may be a cheaper option than buying a new house in some areas
  • Depending on the type of loan you choose, interest rates can be competitive.
  • Monthly repayments are usually fixed, making it easier to budget.
  • If your loan is secured, you could lose your land if you default on your repayments.
  • You’ll need a good credit score to qualify for the best interest rates.
  • Depending on the type of land you’re buying, you may have to put down a large deposit.
  • If the land doesn’t already have planning permission, you may find it harder to get finance.

Secured loan jargon buster

  • APRC. The annual percentage rate of charge (APRC) includes the interest rate and fees to give an indicator of the annual cost of a secured loan. As secured loans and mortgages can offer rates that change over the life of the loan, the APRC is intended to show how different loans may compare after these changes are taken into account.
  • Maximum LTV. The maximum loan-to-value ratio (LTV) is the highest percentage of the value of your property or asset that you can borrow against.
  • Secured loan. A secured loan requires you to use an asset, such as a property or a vehicle, as security against the loan.

Bottom line

It’s more than possible to get a loan to buy land in the UK. Start with a clear development plan for your land and an excellent credit score and explore the full range of lending options to improve your chances of being approved and securing a good deal.

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