Owning our dream house is often so high on the list of our wants and desires. Having a stable and secure place that we can call home, make roots and bring up our family is an important thing. Sometimes you can't find the house that you want to make into a home. You might not want to live in a house that has already been built or a town that is surrounded by other people. You might spot a little piece of land away from the hustle and bustle of life. Or it might be that someone is sick of their huge garden and is selling off a section to be built on. Whatever reason you're looking at a portion of land to buy and build on, you might not have the cash to do it outright. That is where a mortgage would come into play. Can you get a mortgage on land? Is it possible to get help from the bank or building society to buy a plot of land? Let's take a look.
What Is A Mortgage?
In it's simplest form, a mortgage is a loan. The lender agrees to give you the money and you agree to pay it back over a set term. This will involve monthly instalments and keeping up payments. If you didn't keep up these payments, you would risk defaulting on the mortgage and losing your home. The mortgage company will want to view you as a safe bet before they lend you the money. They make their money by the interest that you pay on top of the amount you borrow.
They might lend you £200k but you could pay back £240k over the course of your mortgage. This depends on the interest rates and terms you sign up to. There are many checks a mortgage lender undertakes on you to see if you are that safe bet. These checks and more come into play if you were looking to get a mortgage on land.
Can You Get A Mortgage On Land?
The answer to the question of can you get a mortgage on land, is yes. These mortgages are though, extremely different to a basic mortgage for a house that already exists. There are many reasons as to why you might want to have a mortgage on land though and they don't all revolve around putting a house on it. Let's look further into the subject.
Self Build Mortgage
Firstly, it's worth noting that you can't just head into the woods, hack down some trees and pop a house there. There are many things that need to be done first. Along with planning permission, it might simply not be possible to build there. If there is a plot of land available that already has planning permission for a home to be built, you're likely to be closer to building that having to acquire the permission yourself. There are still checks that should be undertaken though. A self build mortgage is a loan of two parts. The first half to buy the land and the second part to build the property. Mortgages like this often release the money in stages, so you can buy the land but then borrow as you build.
Can you get a mortgage on land that is woodland? There are some of us who see woodland for sale and want to buy it, to keep it as woodland. There are so many trees being cut down around the world, retaining some woodland is an admirable thing to do. Owning your own area of woodland can be great for your wellbeing. Go for a walk in an area that you own. Those are your trees, your nature, your plot to enjoy. Plant more trees in memory of a loved one to create a named woodland and help generations for years to come. You will have to be viewed by the bank as someone who can keep up the repayments but you'll also have give your plans for the woodland and what you'll use it for.
Similar to the woodland mortgage, an agricultural mortgage could be possible on that you want to use as a smallholding. This could be to raise animals, grow crops, become self sufficient. This could be done with a business in mind or simply buying some land next door to where you live to enjoy as a family. Woodland and agricultural mortgages are fairly similar.
Many of the companies who are most likely to give you a mortgage for these specific needs are niche. Specialist companies who deal specifically with these types of mortgages. However there are also other well known banks who will look at your situation.
There are many things that come into play when you apply for a mortgage. The lender will look at your credit score along with the LTV (loan to value) of the loan. This is the amount that you're borrowing compared with the value of the thing you're buying. So you might have a £20,000 deposit to put down but what you're buying is £100k. This would mean you need a 80% LTV mortgage as you're borrowing 80% of what you're buying. There is often much more risk involved when looking at mortgages on land, as there is no property there to use as security. The lender will look at your bank account, your incomings and outgoings.
They need to see that you can afford to pay this money back, if you are a good customer to have and if your financial situation is up to this loan. There are ways to improve your credit score before applying for a mortgage. Get your finances in order to make yourself look like a better prospect. Getting a mortgage for buying land might not be quite as simple-a-process as getting a basic mortgage to buy a property, but it is definitely still possible.
Can you get a mortgage on land? Yes, you can!