Land Equity Loans

If you are looking into the possibility of land loans, you could not have picked a better time. Because there are fewer buyers (after all there is a bit of a recession going on) lenders are working a lot harder to get your attention. There is something odd related to this apparent shift in power dynamics. You would think that land loans would be available at low rates if the lenders want your business but that is not necessarily the case.

You will soon discover, that land loans are being offered at a wide range of rates for the very simple reason that land often entails a large investment and the impact of even a small percentage point difference could potentially mean big bucks to the lender.  If you are considering applying for a land loan, bear this in mind. You are in the driver’s seat, so to speak, so it is worth your while to look around. Even with the variable rates, there are some great deals out there.

Look for a long-term fixed rate at the lowest possible cost. As just noted above, with something as big as land loans can be, a fraction of a percentage point can cost you a pretty penny. This is no time to be getting into short-term or variable rates. You don’t need the surprises either of these can give you.

One of the options worth considering is raw land loans. Just a refresher here – raw land loans are loans for land that is, well, raw. It has no structures on it and has not been developed. It does not even have utilities installed or roads. Lenders look at the value of the land, not your credit-worthiness.  The good news here is that once you start improving the raw land, the value can leap to new heights. Side note here, if you do decide to go this route, make sure that your plans for the land are acceptable to the regulatory bodies.  It helps if you have a plan drawn up for the land that takes the zoning regulations into consideration. Lenders can be skeptical about such purchases because there is the danger of the grand plans never coming to fruition.

Bridge loans are great when you are buying a new house because there is a gap sometimes between selling your current home and buying your new home. However, these are not all that applicable to buying land. Unless of course, if you are selling land, where purchasing the new land depends on selling the current land. But this is not often the case. If you are having a hard time selling your land, then you might consider land equity loans.

Bare Land Loans

In order to buy a piece of land, it is most likely that a person will need to consider land loans. The fact is that parcels of land can be very costly and trying to attain secure financing can be a difficult task. There are some lenders who may be cautious about providing loans for land which is undeveloped more than if it were for a regular mortgage. Moreover, by going about it the right way, a person can get the loan they need in order to attain their dream property. Here are some ways for a person to go through the process of getting loans for land and ensure he gets the best land loans possible.

The first and number one thing that has to be done before applying for a land loan is for you to thoroughly check your credit report. If your credit score happens to be high, then this will be the ideal time to make an investment in land properties.

On the other hand, if the credit report shows a low rating, then you should think twice. This can cause a person to not be able to get approved for  loans for land and even if you happen to get a loan, keep in mind that there are higher fees, payments, and interest rates that apply.

It is essential to remember that if you are planning on building a home, you need money for that, as well as money for securing the loan. If your credit is in bad shape, then it may be a good idea to improve your score first before attempting to apply for land loans. If you get a loan to buy land before you are ready, there is a chance that foreclosure will be the result. This will be the case, especially if payments are not made on time. In turn, the money you used to invest on the said property will go to waste.

Once you get the loan, make sure you continue and start building on the land as soon as possible; this is the second thing you must take into consideration. Thirdly, try and get a line of credit with your land loan. One way to make a good deal is by taking out a mortgage on a piece of property and credit line for the construction of a home; then combine both in one loan. On this note, keep in mind that more money is needed, which will be something your lender has to think about as well.

Government Land Loans VS Traditional

Farm lands fall under one of those special categories of lands. This is why there are separate land loans when it comes to farms, namely farm loans. You can sometimes also apply for land loans for farm development that are being offered by the government’s agricultural department.

Land loans from the government are strictly meant for farm and agriculture development. So if you have other plans for your farm land, then you shouldn’t even bother to apply for governmental land loans – you will most likely get denied almost instantly. Of course, you can always get loans for land either from private investors or any commercial bank. However, government land loans almost always have lower interest rates on farm loans or any other loans for that matter.

One thing that you should always remember when you are considering applying for a land loan, for the development of your farm, is that you should seek long term rates. The agricultural industry is highly unpredictable and there is really no way you can predict when or if you are going to profit or not. Sure, you may actually make a profit on a quarterly, semi-annually or annual basis depending on the type of agricultural crops that you seek, however, nothing is certain.

Once your land loan is approved you should proceed carefully. Don’t make any risky impulse investments or you might end up regretting it. Land loans can actually cost you your land if you are unable to make back enough money and repay them. So, you ought to carefully make a plan and follow it strictly. Most farmers and farm developers spend a lot of money in hiring workers. What you can do instead of hiring many people, is to invest a portion of that wage money into buying machines and special equipment that automate the farming tasks. This might prove to be more costly when you are first starting out, however, the long run benefits will surely overweight the drawbacks. Then again, you might decide that it’s better to play it safe and keep some money on the side, since you it’s always a good idea to save some for the hard times.

Also, you need to make sure that you can afford your land loan payments, since you won’t have any monthly income and it might be an issue at early on. Those government land loans would come in handy in that case, so if you qualify for them don’t think about it – go ahead and fill out that application!

Land Loans VS Mortgage Loans

If you are a property developer, or in the construction business, you may be searching for a land loan in order to purchase the land you intend to develop.

You may not be ready to build at the moment, but the property might be in a location that is hot and rapidly selling out.  The most common type of land loans are for builders and developers who want to lock up that piece of property for future development, yet aren’t ready to begin construction at the moment.  They are not hard to find and land loan rates are often negotiable based on your company’s history and credit worthiness.

Often private individuals spot a piece of property where they would like to have a home built either now, or at some point in the future.  If there are currently no developments on the property, then a land loan would be the way to borrow money in order to purchase that property to be developed at a later date.  Land loans are available if the property is undeveloped.  If there is construction on the property you wouldn’t be looking at land loans, rather you would need to apply for a conventional mortgage loan.

There are times when communities grow at such a fast rate that developers plan shopping plazas or malls in order to grab a rapidly growing market area.  If the developer is not quite ready to build yet, but wants to snag that location, he would probably apply for one of many available commercial land loans.  At some future point when he is ready to build, he can then borrow money through construction loans to be used for the actual development of the property.

Land loans are an integral part of the development of any housing developments.  Builders begin with a land loan.  Once the land has been graded and readied to be built on he then acquires construction loans.  The land loan and the construction loan are then paid back in full upon sale of the property.  Land loans and construction loans are often short term loans.  They may come due at six or twelve month periods.  If the property hasn’t sold, land loans and construction loans are often renewable.

Sometimes several developers and construction companies develop a neighborhood.  If a builder only wants to develop a portion of the land in the development he usually applies for a type of land loan known as lot loans.  Because he is only going to build on a lot or perhaps a few lots in the development they are referred to as lot loans.

The basic difference between a mortgage loan and a land loan then is whether or not there is any construction on the land.  Mortgage loans are for properties that have been developed while land loans provide funds to purchase the land for future development.

Investing in land

First things first – any investment bears its risks. That is a golden rule that you should never forget. If anybody tells you that an investment is going to make you money 100%, you should just move on. Remember the old expression “If it sounds too good to be true, most of the times it isn’t”. I swear by that expression, especially nowadays with this economy. Nevertheless, based on the figures we have from past years, we can notice an overall increase on the value of land. Furthermore, we have seen instances where certain areas have risen up to 15% in a single year. Again, that’s not to say that investing in land and getting yourself in land loans is a great way to secure your financial future, not by a long shot. Like every investment, it bears its advantages and its disadvantages. However, there are many who seem to believe that it’s one of the most secure investments one can make.

When you find yourself at a point where you feel it is time to make your move, make sure that you put a lot of research on your investment and the institution that will handle your loans for land. You need to be able to evaluate if the value of the land you are investing in will rise or fall up to a certain extent. Obviously, no one can know for sure, and you will notice many who claim that do, but you should always keep your eyes open. If you were trying to sell a product, wouldn’t you always claim that the product is good? Same goes for land owners… a land owner trying to sell is the equivalent of a car salesman claiming that his car will keep its value. For some it’s true, for others it’s not. That’s why you should always perform your own market research and make up your mind before you get into negotiations.

Some things that you need to look out for are new developments in the area of the land in question. Let’s assume that you are considering buying a piece of land near a beach. If a hotel was to be built, you can bet that they will put their effort and money in order to raise awareness of the area. That can make the value of the land surrounding the area raise substantially and in a not so long amount of time. Same goes for a new golf course, a hospital, a theater or basically any sort of institution with the money or influence to attract visitors or new residents to the area. Those who do their research in advance in the land they are considering and the avalaible loans for land purchase  are those who make the most out of it. Always keep that in mind when planning your investments.