Bridging loan for planning permission:funding planning gain
A bridging loan for planning permission is short-term finance that lets you buy a property or site, hold it while you apply for planning consent, and repay the lender from the uplift in value through a sale or a refinance onto development finance once permission is granted. Investors call this a planning gain strategy: the profit comes from the consent, not from building anything.
The key point to understand is that lenders fund the asset as it is today. They lend against current use value, not the value with planning, and they treat the planning outcome as uncertain. That shapes how much you can borrow, how long the term should be and what the exit has to look like.
Key takeaways
A bridging loan for planning permission funds the purchase while you obtain consent, then exits on the uplift.
Lenders lend on current use value, not the value with planning.
A fallback exit in the existing use makes the deal far easier to fund.
Choose a term that covers the planning timetable with a buffer for delay.
Model a refusal scenario before you buy.
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How does bridging finance for planning gain work?
The typical sequence runs like this:
Identify the opportunity. A building or site where you, and ideally a planning consultant, believe consent for a more valuable use is achievable.
Buy with a bridge. The lender values the property in its current state and lends a percentage of that value or the price, whichever is lower.
Apply for planning. You submit the application, respond to consultees and, if needed, negotiate conditions or a Section 106 agreement.
Exit on the uplift. Once consent is granted, you sell the property with planning or refinance onto development finance to build out the scheme.
The strategy suits a range of assets: redundant offices or shops with residential potential, pubs with alternative use value, commercial buildings suitable for a different commercial use, and land. If you are buying land specifically, our bridging loans for land page covers land LTVs and valuation in detail.
Why do lenders lend on current value, not value with planning?
Until consent is granted, the uplift is only a possibility. If the application is refused and the borrower cannot repay, the lender has to recover its money by selling the property as it stands. So the RICS valuer reports market value in the current planning state, and the lender sizes the loan on that.
Where the market would genuinely pay a premium for the planning potential, the valuer may reflect some hope value, but it is rarely the figure you have in your appraisal. Expect the lender to ask:
What does the property earn, or could it earn, in its current use?
What is the evidence that consent is likely, such as pre-application advice, planning policy or nearby approvals?
What happens if consent is refused or delayed?
The answer to the last question matters most. A building that can still be let or sold in its existing use gives the lender a fallback.
Which planning routes do lenders see most often?
Planning route
Typical example
Lender view
Full planning application
New-build scheme on land, extension, larger conversion
Most uncertain timescale; lenders want a longer term and a fallback
Prior approval under permitted development
Class MA, Class E to residential in England
Shorter, more defined process, but prior approval matters can still fail
Change of use between commercial uses
Office to clinic, retail to restaurant
Often lower risk where the building already suits the new use
Variation or removal of conditions
Extending opening hours, removing an occupancy restriction
Narrow but can add value; evidence of policy support helps
Outline then reserved matters
Residential land
Value increases at each stage; lenders often exit on outline sale or refinance
Have a deal in front of you?Send us the property and the numbers. We will tell you quickly whether it is fundable.
What exit strategy works when planning is the plan?
Lenders want two things: a primary exit that uses the planning uplift, and a credible fallback if consent does not arrive in time.
Sale with planning: selling to a developer or housebuilder once consent is granted. Evidence of demand and agent pricing helps.
Development finance: refinancing onto a development loan that repays the bridge and funds the build. Lenders like to see a feasible appraisal and your experience.
Fallback on current use: letting or selling the property as it is, or refinancing onto a commercial mortgage if it has income.
Set the term to cover the realistic planning timetable plus a buffer for validation, consultation, possible amendments and legal work afterwards. Our exit strategies guide sets out the evidence lenders expect for each route.
What are the downsides of a bridging loan for planning permission?
Bridging for planning gain can work well, but the risks are real and you should weigh them before you buy:
Refusal or appeal. A refusal can leave you holding an asset worth only its current use value, with bridging interest running.
Delay. Planning departments often take longer than the statutory periods, and appeals add months.
Cost. Interest is priced per month and usually retained or rolled up, so the longer planning takes, the more of the uplift goes on finance.
Conditions and obligations. Section 106 contributions, CIL and onerous conditions can reduce the value of the consent.
Extension and default costs if the term runs out before the exit.
Run the numbers with a refusal scenario as well as a success scenario. If the deal only works when everything goes right, it is probably too thin.
How much would a 200k bridging loan for planning gain cost?
The total cost depends on the monthly interest, how long the loan runs and the fees. We do not quote a single market rate, because pricing depends on the LTV, the asset, the planning risk and your experience, but the structure is predictable.
For example, on an illustrative £200,000 gross loan:
An arrangement fee of 1% to 2% would be £2,000 to £4,000, usually added to the loan.
Monthly interest is charged on the gross loan for each month the loan runs, so a 12 month term costs twice as much interest as a 6 month term.
A valuation fee, the lender's legal fees and your solicitor's costs are added on top, and some lenders charge an exit fee.
Use our bridging cost calculator to test different terms and see the total cost against the planning uplift you expect.
Is there a cheaper alternative to a bridging loan?
Buying subject to planning, or with an option or conditional contract, so you only complete once consent is granted.
A commercial mortgage, if the property has income in its current use and you have time.
Joint venture equity or a promotion agreement with a landowner, which shares the uplift rather than borrowing.
Cash or vendor deferred payment, which avoids finance costs entirely.
A bridge is usually more expensive per month, but it is often the only way to buy quickly and unconditionally. Our guide to alternatives to bridging loans compares the options.
Is a planning gain bridge regulated?
Buying a property or land to obtain planning for sale or development is an investment purpose, so the bridge is unregulated and we arrange it directly. If the security includes a home that you or an immediate family member live in or will live in, the loan may be a regulated mortgage contract, so we would introduce you to a firm directly authorised by the Financial Conduct Authority. Take advice from your accountant on the tax treatment of any planning gain.
Unregulated commercial and investment bridging is arranged directly. Any case where the security includes a home you or an immediate family member occupies, including a flat above commercial premises, may be regulated and is introduced to a firm directly authorised by the Financial Conduct Authority. We are not directly authorised by the Financial Conduct Authority ourselves. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Can I get a bridging loan to buy a property without planning permission?
Yes. Most planning gain bridges are on property without the consent you intend to obtain. The lender values the property in its current use and lends against that figure. A credible planning case and a fallback exit, such as letting or selling in the existing use, widen the choice of lenders.
What does Martin Lewis say about bridging loans?
We cannot speak for Martin Lewis or MoneySavingExpert, and their consumer guidance is aimed at homeowners rather than property investors. Our own view is practical: bridging is expensive short-term borrowing, so only use it with a clear, evidenced exit and a buffer of time, and compare the full cost against the gain you expect from planning.
How much would a 200k bridging loan cost?
It depends on the monthly interest, the term and fees. As an illustration, a 1% to 2% arrangement fee on £200,000 is £2,000 to £4,000. Interest is charged each month the loan runs, plus valuation and legal fees and sometimes an exit fee. Our bridging cost calculator shows the total for different terms.
What are the downsides of a bridging loan?
Higher monthly cost than long-term finance, fees that reduce the net advance, and the risk that the exit slips. For planning gain the main risk is refusal or delay, leaving you with a property worth only its current use value while interest continues. Extensions and default interest can be expensive.
Is there a cheaper alternative to a bridging loan?
Possibly. Buying subject to planning, using an option agreement, a commercial mortgage on an income-producing property, joint venture equity or deferred payment to the vendor can all cost less. They are usually slower or less certain, which is why bridging remains common when you need to buy unconditionally.
Will the lender increase the loan once planning is granted?
Some lenders allow a further advance once consent increases the value, but most borrowers refinance instead, either onto development finance or a new bridge on the consented value. We check whether this option exists before you choose a lender.
How long a term should I take?
Long enough to cover the realistic planning timetable, any amendments, legal work after consent and the sale or refinance, plus a buffer. For full planning applications that often points towards 12 to 18 months rather than a short term.
