Land mortgages are a more specialist area of borrowing than property mortgages, but they are certainly available. While you won’t usually find mainstream lenders offering land mortgage products, it’s perfectly possible to find a suitable lender with the help of a specialist mortgage broker, like ourselves.
Last updated on
May 9, 2025 17:07
As well as being harder to come by, land mortgage providers tend to have fairly strict criteria, so a strong application is usually required. Again, help from experienced brokers who know what lenders are looking for will be key to securing the right finance for your land purchase needs.
Land mortgage funds are typically released in stages, particularly if you plan to build on the land. Land being purchased purely for agricultural or leisure use may be provided in a single lump sum, depending on the circumstances.
Interest rates tend to be higher than they are for mortgages to buy property. Most applicants who plan to build on their purchased land choose to remortgage onto a property-based loan once their development is complete to avoid remaining on a higher rate than necessary.
Monthly repayments are made in the usual way on land mortgages, with interest-only, capital repayment or a combination of both (known as a part and part mortgage) options available. However, this will vary by lender, so it’s important to ensure that your chosen mortgage provider offers the repayment method that suits you best.
Deposit requirements vary from lender to lender, but based on typical lender criteria, you’ll usually need at least 20% of the land’s value as a deposit for a land mortgage. What you intend to use the land for can also impact the deposit size necessary.
For example, a mortgage to purchase woodland or agricultural land could be as high as 50%, whereas if you’re buying development land to build commercial property, around 25% is more likely. Self-build mortgages sometimes allow you to buy the land as well as the development costs, and while it’s possible to obtain one with as little as 15% deposit in some scenarios (subject to criteria), most lenders prefer a deposit of at least 20-25%.
The type of land mortgage you need will depend on the type of land you wish to buy and what you intend to use it for. This could be any of the following:
Self-build mortgage - This is to buy a residential plot of land on which you will build your own home, and may be combined with development funds
Agricultural mortgage - This is to buy land that is to be used for either personal or commercial farming produce, including livestock and arable farming
Commercial land mortgage - This is to buy land, often brownfield land, on which you intend to develop property with commercial intent, whether that’s property for commercial use or residential developments to sell or let out
Woodland mortgages - Mortgages to buy woodland or greenbelt land are very hard to come by, as is the land to purchase. It’s unlikely that you would be granted a change of use for this type of land, which makes it a high-risk investment
If you’re unable to qualify for a land mortgage, it’s possible to use a bridging loan to purchase development land and remortgage once the property is built. Most land is sold at auction, so bridging loans are often helpful in meeting the 28-day payment deadline, as they can be arranged much more quickly than a mortgage.
Whether or not you need to pay stamp duty on a land mortgage will depend on the intended use of the land, as well as where in the UK it’s located.
Land bought in England and Northern Ireland is charged based on the land value, not the value of the final property if you intend to develop it for residential or commercial use. This is why many people opt to self-build their property.
If the land is intended to be used purely for agricultural use or otherwise remains undeveloped, the stamp duty rates can be lower. Although there are similar rules in Wales and Scotland have similar rules, the actual stamp duty rates differ, so it’s advisable to speak to a qualified tax adviser to ensure that you understand the liability involved in your purchase.
Self-build mortgages can be taken as purely a development loan if you already own a plot of land, or as a combined borrowing to purchase land and develop on it. However, it’s important to note that not all lenders offer self-build mortgages that allow for land purchase, so it’s important to find the most suitable lender for your needs.
Alternatively, you could use a land mortgage or bridging loan to purchase the land before taking out a self-build mortgage.
Last updated: 28/04/2025
[Disclaimer] This content is intended for general guidance and is not a substitute for personalised mortgage advice.
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