Common Types Of Land Loans
If you are interested in buying some land and want to know what type of loan would be ideal then this is the article for you. If you have some money to put in as a down payment then there are currently a few options for you.
Banks will look at your desire to buy land with a skeptical eye. Why do you want it and what exactly do you plan on doing with it. On top of that they will of course wonder how much money you are putting up for the project and how on earth will you make the required monthly payments on it. If you can answer these questions then good for you. If you can not then you are likely in the wrong business. Banks like safety and if you offer them none it will be really tough to get money to buy your land.
In addition to the fact that it is raw land there are a lot of other variables. One of the bigger variables is what type of land it is. If it is farm land that has yet to be farmed then it is going to cost a lot more to finance then if it is an empty lot right next to a thriving development.
If it is raw land that is not even hooked up for sewage and electricity then the bank will want even more money to finance the project. This is again because of the risks involved from the lenders perspective.
Make sure that if you are developing raw land you get a staked survey done and that you know for sure if you can get the required permits and utilities that you will need later down the road. If you have plans to immediately build on it you will have an easier time getting it then if you want the land for pure speculation.
When it comes to financing the project you may be amazed to learn that home equity loans are usually cheaper then a direct loan. Why is this? Mainly because you will work harder to keep your home than to keep an empty parcel of land. Remember that banks love certainty.
Land loans usually have a ten to fifteen year term. Homes have thirty years but you live in them and they are a finished product. Raw land is not so the bank will not take on the extra risk of sitting on it for thirty years.
If the land is owned and held as an investment then you may be in luck. Many times the interest involved in land loans is tax deductible. And as we know anytime we can save money from the IRS is a good time.
Banks will look at your desire to buy land with a skeptical eye. Why do you want it and what exactly do you plan on doing with it. On top of that they will of course wonder how much money you are putting up for the project and how on earth will you make the required monthly payments on it. If you can answer these questions then good for you. If you can not then you are likely in the wrong business. Banks like safety and if you offer them none it will be really tough to get money to buy your land.
In addition to the fact that it is raw land there are a lot of other variables. One of the bigger variables is what type of land it is. If it is farm land that has yet to be farmed then it is going to cost a lot more to finance then if it is an empty lot right next to a thriving development.
If it is raw land that is not even hooked up for sewage and electricity then the bank will want even more money to finance the project. This is again because of the risks involved from the lenders perspective.
Make sure that if you are developing raw land you get a staked survey done and that you know for sure if you can get the required permits and utilities that you will need later down the road. If you have plans to immediately build on it you will have an easier time getting it then if you want the land for pure speculation.
When it comes to financing the project you may be amazed to learn that home equity loans are usually cheaper then a direct loan. Why is this? Mainly because you will work harder to keep your home than to keep an empty parcel of land. Remember that banks love certainty.
Land loans usually have a ten to fifteen year term. Homes have thirty years but you live in them and they are a finished product. Raw land is not so the bank will not take on the extra risk of sitting on it for thirty years.
If the land is owned and held as an investment then you may be in luck. Many times the interest involved in land loans is tax deductible. And as we know anytime we can save money from the IRS is a good time.
About the Author:
Spencer educates people about bad credit home mortgages, guaranteed payday loans, and home loans for bad credit.
posted by Credit Counseling at
4:25 AM
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