Where to get a land loan

Are you looking for a loan to buy land? If you are considering buying or investing in land, then this article will provide you with a brief guide on how to obtain a land loan.

Land loans

What are they?
Land loans are loans that you can obtain from a bank or building society in aid to purchase land, be it farm loans or developing loans. There are many lenders available who will assist you and finance your loans against some form of collateral. This is to ensure a guarantee on repayments from good faith from the lenders. What are the types of land loans?
Land loans are treated similarly to standard loans. The type of land loan depends a lot on the property, what you plan on doing with it, and when you plan to have the work completed. Unimproved land, or raw land, with no plans for improvement is the hardest type of property to secure a loan with because it is a speculative investment. Raw land has no added improvements like sewers, utilities, streets or structures.

Raw land

Difficulties with land loans
A raw land loan will have higher deposit requirements and a higher interest rate than an improved property loan due to the lack of guarantee with the property development. Some lenders would require a 50 percent down payment, but you should be able to find a lender who will require only a 20 percent down payment if you shop around. A local lender who is familiar with the property will be more willing to work with you on the loan rather than a lender who is unfamiliar with the area. When you are purchasing the property, insist on a warranty deed and title insurance to make sure that you'll have a clear title to the property. A home equity loan, or refinancing your current mortgage with cash out to purchase the land, may meet your needs better than a land loan. Since your current home secures the home equity loan, there's less risk to the lender. This should mean having a lower interest rate. Land loans typically have 10-15 years maturities just like home equity loans. The interest on your home equity or mortgage loan may generate a tax deduction on your income taxes. The interest rates will vary, and using a mortgage broker is a good idea when you are looking for a land loan.