What is the best way to borrow money to buy land to build on?

Given your situation, where you need to raise £80,000 for a relatively short period of time (8 months) to purchase land with planning permission for building, there are several potential options to consider for borrowing this amount. 

Normally you would want to do a self-build mortgage which would also include funds to cover the build cost, however your situation sounds a little more unusual if the builder is paying for the cost of the build. This may mean a lender will look at the loan as development finance, which is slightly more expensive. 

Ways of Raising Finance To Buy Land 

If you are only raising the £80,000 for the cost of the land then, subject to lenders affordability and standard criteria you could raise the money on your existing mortgage. This could be done by way of a first charge remortgage to a new lender or second charge and keeping the £130,000 with your current provider. 

Here are some alternative options:  

1. Personal loan - depending on your creditworthiness and the terms offered by lenders, you may be able to secure a personal loan for the desired amount. Personal loans typically have fixed interest rates and repayment terms, making them straightforward for short-term borrowing. However, interest rates on personal loans can vary depending on your credit score and other factors 
2. Home equity loan or line of credit - since you already have a mortgage on your house and there is equity available (your house is valued at approximately £280,000 with a £130,000 mortgage), you could explore options such as a home equity loan or a home equity line of credit (HELOC). These loans allow you to borrow against the equity in your home, typically at lower interest rates than personal loans. However, keep in mind that these loans may involve fees and closing costs  
3. Bridging loan – a bridging loan is a short-term financing option designed to bridge the gap between the purchase of a new property and the sale of an existing property. In your case, a bridging loan could provide the funds needed to purchase the land and cover building costs until you secure long-term financing or sell your existing property. Bridging loans often have higher interest rates and fees compared to traditional mortgages, so it's essential to carefully consider the costs and risks 
4. Family loan or gift - if possible, you could consider borrowing the funds from family members or receiving a gift to cover the £80,000 needed for the land purchase. This option may be more flexible in terms of repayment terms and interest rates, but it's essential to have clear agreements in place and consider any potential implications for family relationships  
5. Negotiate with the builder - since the builder will cover all building costs, you could explore the possibility of negotiating a financing arrangement with the builder to cover the land purchase as well. This could involve an agreement where the builder provides funding upfront, and you repay the amount once the project is completed or through other arrangements  

Before proceeding with any borrowing option, it's crucial to carefully evaluate the terms and costs involved, consider your ability to repay the loan within the desired timeframe, and explore alternatives for financing the land purchase.  

If you would like to discuss your enquiry in more detail, then please call 0330 433 2927 and we'll arrange for one of our consultants to contact you.