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It would be great if we could all pay cash for the property we buy, but with high ticket items such as our homes or land, but only a small number of our transactions involve no financing. Here are some guides and considerations in getting your land purchase financed. There are two main alternatives: Financing from outside sources or owner financing. Outside Sources Financing from outside sources using the land as the only collateral is possible but you should be prepared for a substantial down payment. This down payment is generally in the range of 20 to 50 percent of the purchase price. In this respect land loans are not comparable to home loans. Interest rates tend to be higher than home loans and repayment terms tend to be much shorter. Closing costs may include loan origination costs, appraisal fees and other costs incurred by the lender. Home equity loans provide a great choice if you have good credit and equity in your home. This is a home other than the one which is being purchased. The advantages include tax deductibility if you itemize. The interest rates tend to be low since the loan is using your home as collateral. Closing costs tend to be higher but sometimes a standing relationship can reduce the costs of borrowing. Land home packages have become more common when buyers want to combine a home loan and the land in one package. We can work with your lender to expedite the process. Owner Financing There are many advantages of owner financing. While individually offered terms can vary greatly, the terms under which we offer owner financing provide some great advantages. Generally, no qualification is necessary. Prior bankruptcies are not a problem. Since we are confident in the value of the collateral, we do not rely on your credit but on the value securing your loan. Owner financing is easy. It requires fewer documents and no appraisals or lender required administration such as origination fees or discount points. Our interest rates tend to be competitive with loans using the land as collateral but more expensive than home loans. Since there is no prepayment penalty, you can use owner financing until such a time as you can find more favorable financing. We will sell any of our properties for cash or terms, and the choice of what financing works best for you is yours. |
