How to Refinance Land

By Rose Brown
Content writer
Published: 20 October 20221 minute read
How to Refinance Land

Since developing land is a long-term commitment, you may need to switch up your finance as the project progresses. So, if you’re ready to learn more about refinancing land and when to make the decision, keep reading this guide.

There are many costs to consider, including the initial purchase as well as the cost of securing planning permission and developing the land. So, the right finance package is paramount to the success of your project. 

Table of Contents

Land can prove to be an extremely profitable investment. In fact, the UK land values are expected to increase by 3.5% this year and another 3% in 2023. As many developers look to invest in land as a basis for commercial or residential development, you must take the time to learn about the role that finance plays in your success. 

If you already know it’s time to refinance or want to speak directly to the experts, get in touch with the team at Rangewell today and kickstart your land refinance application.

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When to refinance land

With refinancing, timing is critical. If your finance doesn’t match your circumstances, you may not be able to afford to complete your development within the agreed timeframe. 

For example, the loan that allowed you to purchase the land may no longer be suitable once you have secured planning permission or begun development. Knowing when’s the right time to refinance can be hard, so speak to Rangewell to get advice tailored to your unique circumstances.

To get you started, here are some of most common instances that often lead to refinancing for landowners:

When planning permission is secured

Following the acquisition of land, one of the first steps developers take is to apply for planning permission. When it comes to planning permission, there are many factors to consider. Depending on the location, the community, the type of land and the surrounding areas, it may take some time to get planning permission granted for the project you’re working on. 

For those reasons, the value of your land may change following the successful approval of planning permission. A lender’s decision is based on risk, and land with planning permission is lower risk than one without. So, that’s why this is a common time to refinance your project, as you may be able to access more equity.

When the property development commences

Once you begin building on your land, the risk lessens even more, and this can be another time to revisit the funding to see if there is any opportunity to refinance. Remember, refinancing simply means changing the finance option to a more suitable option; this may involve switching lenders completely or moving to a longer-term loan that covers more development costs. 

When your circumstances change

The property market is a turbulent one as it’s beholden to many ever-changing factors. The COVID-19 pandemic, alongside the effects of Brexit, caused chaos for many developers in 2020 and beyond. The supply chain took a hit, and many construction companies were unable to access the materials they needed to carry out their work. 

However, these events have also resulted in changing attitudes as many people fled the cities to work from home in more affordable areas, resulting in an increased demand for suitable housing in many hotspots across the UK. 

So, as a land owner and a property developer, it’s valuable to know your circumstances and recognise when internal or external factors may have affected them. For example, supply chain issues may have an impact on your project timeline, so you may need to remortgage to ensure the payment terms are suitable for your needs.

When you complete another project

If you’re working on multiple projects at one time, the completion of one may improve your standing with another. The sale of land or even a completed property development is a great opportunity to revisit your financial standing on other projects, especially if you unlocked capital to invest in the new development. 

Investing the profit from one project into another can both reduce the amount you owe to your lender, as well as demonstrate to the lender that you are less of a risk as you have proven successful on other projects. The better your development CV, the better terms you will be offered on future developments. 

When there is a change of use

If you have acquired land that already has planning permission, it doesn’t necessarily mean you’re ready to break ground. Planning permission is dependent on how you intend you use the property, so if you have acquired land with permission for commercial use but intend to build residential homes on the site, then you will need to resubmit a planning application to the local council.

So, since planning permission can impact your land value, this might be a good time to consider refinancing to see if you can get a better deal for your land mortgage.

There are several factors to consider when refinancing land. It’s important to search the whole of market and ensure you are getting the best deal. You can do this by working with an independent broker like Rangewell. 

Our team of financial advisors help you to determine whether now is the right time to finance your land, as well as supporting with the application process.

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Short-term land refinance

We’ve explored land mortgages and how changing circumstances may impact the funding you can get for your project, but what about short-term finance? 

A short-term land loan, typically known as a bridging loan, can allow you to access funds quickly and over a short repayment period. As the name suggests, this funding type may help you to “bridge a gap” in your financial situation. 

Buying and developing land is a risky process. So, you might find yourself requiring a one-off short-term loan to cover an unexpected cost, such as reapplying for planning permission or a land inspection. If you envision yourself struggling to meet the repayment terms, then it’s wise to consider refinancing and incorporating this debt into your long-term commitments. 

When it comes to dealing with multiple loans on one development, it’s important to work with the experts. At Rangewell, we work with you to find and secure the best land loans for your project. And we’re here for the long haul, so if you need a bridging loan or think debt consolidation is on the cards, then we’re here to help. 

Speak to Rangewell today about refinancing your land and getting your loans to work better for you.

Improving your land value

The higher value of your land and the lower the risk is for your lender, the better finance deal you may be able to secure going forward. As we’ve discussed, securing planning permission is one of the key ways to improve the value of your land. So what other ways are there to improve the value of your land, such as:

Remove old structures

Depending on the land you have purchased, there may be existing structures or even disused buildings on the site. Demolishing and clearing any land can be a big job, but it shows the lender you are committed to the project. Land that is ready for development is obviously worth more as you have already put in significant time and financial investment. 

Don’t forget to check the status of any existing structures before clearing the land, as the site may be home to protected buildings or an animal conservation area. 

Improve access

Whether you intend to build commercial or residential properties or simply sell the land once it’s ready for development, there’s one thing every plot needs: access. If your land is difficult to access then, this could cause a whole host of problems for both the developer and future dwellers. 

So, ensuring the land can be easily accessed will certainly improve the value of your land and show the lenders that development is possible on the site. 

Install utilities

You might be thinking it’s a little soon to be talking about utilities, but that’s not the case. The installation of gas, electricity, phone lines and internet is one of the first things you should consider when developing land. Provision for utilities will reassure the lenders that property can be built on the site and, therefore, will reduce the risk and potentially allow you to access a better finance package.

Install sewerage and drainage systems

Alongside utilities, correct sewerage and drainage systems are necessary to ensure the successful development of any property on your land. For sewerage, you will need to look into the best waste removal infrastructure to suit the size of the planned development. 

While drainage refers to the quality of the land itself, in particular, the soil and the structure around the site. The UK is no stranger to wet weather, so proper drainage could be the difference between the failure and success of your property development. 

A plot of land with sewerage plans and proper drainage in place will be worth more than one without such factors, and the lender will also be able to see that you have begun to negate some of the biggest risks facing land developers in the UK. 

These are just some of the ways to improve the value of your land. Land value is one of the core considerations for lenders, so if you are able to carry out one or more of the above, then it might be worth revising your funding to determine whether you are now eligible for better loan terms. 

Get in touch with Rangewell to find out more about how to improve your land value and apply for land refinance today.

Debt consolidation for land

Refinancing isn’t always about simply remortgaging; it’s also about consolidating your debts to allow your funding to work better for you. As a land owner, you may have several different loans, including your mortgage, development loans, and short-term bridging loans among others. 

Debt consolidation occurs when the lender pays off your debt and establishes a new and more straightforward financial arrangement. The repayment terms will be better suited to your goals and, as a result, this will simplify your situation and allow you to plan better for the future.

One of the key benefits of debt consolidation is to reduce your monthly payments by spreading your debt across a longer period of time, which is ideal for a landowner looking to kickstart a significant development on their site. Once you replace multiple loans with a single agreement, you will know exactly how much you owe and for how long.

With debt consolidation, a strong application is critical, as the lender will want to see that you are a strong investment opportunity and a low risk. Our team of experts will help assemble your application and identity any sticking points before you get in front of the lender.

At Rangewell, we work with both big and small lenders, including those with significant experience in providing finance for property and land developers. Ready to talk about consolidating those debts? Speak to Rangewell’s refinance experts today.

Refinancing land to release equity

Another reason why you may want to consider refinancing your land is to release equity. This is particularly pertinent if you have improved the value of your land in some way, as you may be able to access the cash currently locked into your project to aid further investment. 

The amount of equity you can release depends on the value of your land, the current amount of equity you have, your loan repayment terms and your overall financial situation. It’s worth bearing in mind that if you remortgage to release equity, then you are increasing your loan and will, therefore, have higher monthly repayments or a longer loan term.

Contact Rangewell to make sure refinancing is right for you and to start your application today.

Land refinance with Rangewell

At Rangewell, we already work with landowners and developers like you to find and secure the best possible funding. Developing land can be a risky business, so it’s important to have the right support in place to navigate whatever might come your way. 

Get in touch with Rangewell to learn more and begin your land refinancing application today.

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