If you already own a plot of land, or your garden is large enough to accommodate another property, you could consider developing the land you own. However to do so, you’ll need to know about planning permission and the type of mortgage required to fund your development.
Here at CR Real Estate, we are firm believers that knowledge is invaluable; so we’ve put together this handy guide to give you all the information you need…
The most complex part about developing land is usually the sourcing of it and the funding required to buy it. So, if you already own a piece of land that is suitable, it can be a lot easier to get started. Whilst you might be ahead of others, it can still be a complex journey as you’ll still need to consider things like planning permission and funding for your development.
There is positive news when it comes to developing on the land you already own. As you already own the land, you’ll only require funds for the build/development. This most often comes in the form of a self-build mortgage; which is essentially development funding for the construction of a new property and comes with an allocated time restraint to complete by from your chosen lender.
Here are some of the most common questions around self-build mortgages…
How do I get a self-build mortgage when I already own land?
If you’re looking to develop the land that you already own, a self-build mortgage can provide you with the funds you need to complete the development work. Often, because you’re only funding the build and don’t need to borrow to buy land as well, there are more options available on these self-build mortgages.
We would recommend to speak to a mortgage broker in the first instance. They will be able to advise you on this and provide a selection of lenders to consider approaching. CR Real Estate work in partnership with The Residential Mortgage Hub to provide mortgage advice for our clients.
How much deposit do I need for a self-build mortgage?
Typically, lenders will either lend against a valuation of the land you own; or on your total build costs for the development.
The criteria for each lender will vary depending on the specifics of your project. But generally speaking you can expect to get 75% to 80% of your land’s valuation figure as a self-build mortgage; or up to 80% based on your build costs. This means that you’ll be expected to fund 20% to 30% of the project yourself. But it’s also good practice to build in an extra 10% to 20% contingency budget for unforeseen circumstances.
How much can I borrow with a self-build mortgage?
The amount of money you can borrow through a self-build mortgage will depend on:
As mentioned, some lenders will lend against the value of your land; while others will lend based on the total build cost itself. Your chosen lender will carry out an affordability assessment to consider your borrowing limits. So, we strongly advise seeking mortgage advice before applying for a self-build mortgage.
Do I need planning permission to get a self-build mortgage?
Most lenders will insist that you have full, detailed planning permission for your project prior to them lending to you.
However, it’s can be possible to get a mortgage advance with only outline planning permission. But should you fail to obtain permission later, you will have to pay back your advance and factor in any additional or associated costs.
Are there any other options for self-build finance?
Whilst self-build mortgages can be a great way to fund the development of land, there are other options to consider including:
Always speak to a financial/mortgage advisor to discuss your options for taking on any finance for your self-build.
Developing land can be very profitable. The important thing is to stay on top of your costs and know your objectives before you start.
Land with planning permission is generally worth more than land without. So, if you’re thinking of selling the land that you own; you could consider a planning application to boost its value even further.
If you’re thinking about building on land you own, you’ll need to consider the following:
To build a new dwelling on the land you own; you will almost certainly require planning permission from your local authority. However smaller additions to an existing property can usually be made under Permitted Development. But large extensions or outbuildings will usually require planning permission.
Whilst 75% of all planning permissions are approved in England and Wales; you should always check what’s permitted and what isn’t. Our expert team at CR Real Estate can advise you or you can speak to your local planning department.
Generally decisions surrounding planning applications are made within 8 weeks. But it can go up to 13 weeks for unusually complex or large applications. You can appeal if the decision takes longer.