Planning Gain Finance

Bridging Loans are short-term loans secured against property. They are called a bridge or Bridging Loan because they are intended to bridge a short-term funding gap - and they can be used in a number of ways.

One of these ways is to buy a property that is not mortgageable. One of the reasons for doing this is to benefit from planning gain.

What is Planning Gain?

The value of most land without buildings or planning permission is relatively low. It, therefore, cannot be used as security for a mortgage. Lenders will take the view that the land will not be easy to sell if a borrower cannot keep up the repayments, and so will not lend.

However, if land is given planning permission and can, therefore, be used for building, it will immediately become much more valuable. It can be sold on for a price that reflects its potential to a builder.

A speculator can, therefore, profit by buying a plot of land, getting planning permission for it and selling it on. There is no need to actually build anything themselves.

This is known as planning gain.

Planning Gain Finance 

These can be greenfield sites that may be likely to form part of local authority development zones, run-down commercial property or brownfield sites, or residential developments where planning potential has not been maximised.

Planning Gain Finance can provide funding to buy potentially lucrative sites prior to planning consent being granted.

It can be repaid from the profits of selling on the land. Alternatively, it is possible for builders and developers to use the enhanced value of land that has achieved planning permission as the basis for raising additional funding to allow them to complete building work themselves. 

Up to 90% funding of the purchase price will be considered if the business case is strong enough.

What will Planning Gain Finance cost?

Like all Bridging Loans, the cost of Planning Gain Finance may be high but, once the planning permission is granted and the value of the property enhanced, refinance onto a Secured Loan may be possible, moving the debt to a lower interest rate until a buyer is found.

However, it is important to understand all the charges involved.

The rate of Interest charged will vary, depending on your circumstances, the scale of funding required and the prospects for gaining the necessary planning permission. Lenders will also want to know how the loan will be repaid - known as the exit strategy.

In addition to the interest cost, lenders will charge an arrangement fee for setting up the loan. This fee may be 2% of the loan amount, although this is sometimes discounted on larger loans. Fees and interest can usually be rolled up and settled with a single repayment.

Why you need Rangewell to find the Planning Gain Bridging arrangements that are right for you

Property Funding of all types is very competitive, and many lenders recognise the potential of planning gain. However, not all have the necessary experience to offer the rates and terms you would need to make your project viable.

At Rangewell, we have the expert knowledge that can not only help you secure the funding you need, we can help you find the most appropriate lender to provide it.