Buy Land Now, Build Your Home Later

A land loan is nothing more than what the name suggests… a loan to buy land; nothing more, nothing less. Land loans are a very small portion of the lending market and banks take a higher risk dealing with land loans than with mortgage loans, explains Casey Fleming, a mortgage adviser with C2 Financial Corp in San Jose, California. If a bank or lender has to foreclose on a land loan, there’s no real way of guaranteeing the bank will get its money back.

“Owners of raw land are much more likely to stop making payments and walk away from the property in the event of a financial event in their lives,” Fleming says. “If you own your own home, you’ll do anything you can to save it. With raw land, you can’t use it or generate any income off it.”

Because there is less demand for land than there is for already-constructed homes, vacant property is far more difficult to sell than a lot with a house on it.

“Most people can’t handle buying land and building something on it,” says Fleming. “It involves a lot more time and money than people expect. Even if it’s a fixer-upper, a land loan calculator is a tool that allows borrowers to gain a better grasp of their expected payments.” It doesn’t even take a minute of your time to type in your information. The best part is you do not need to be a financial expert to utilize the program.

On land loans, some lenders need a large down payment and charge higher interest rates. Furthermore, some land loans have much shorter repayment durations than a normal 15-year or 30-year mortgage.

What is a Land Loan Calculator?

A land loan calculator is a tool that helps borrowers understand how lenders determine the sum to repay a loan. You won’t spend a lot of time filling out the form. The best thing about it is you don’t need a math instructor to understand the calculations or to use the tool.

The monthly installments for your land loan are calculated using the land loan calculator. It also calculates total interest based on the purchase price, down payment, interest rate, and number of monthly payments.

If you are interested in buying land, this tool will tell you what to expect prior to having a conversation with one of the loan officers. Educating yourself as much as possible will help you feel in control of the situation and certain that you are selecting the finest financing solution for your needs.

Calculating the Interest on a Land Loan

If land loans are foreign to you, arming yourself with as much information as you can will only benefit you. You may not be familiar with the interest on a loan. The interest is the amount banks or finance companies charge to borrow money from them. This is figured in the total repayment amount. Your neighbor’s interest rate could be different from yours depending on the closing date and credit scores.

If you use a rural home lending co-op, you may take a lower interest rate in connection with the Farm Credit System.

It’s not uncommon for interest rates to go down just as fast as they went up. Often, it depends on supply and demand. One advantage to look for is a long-term fixed-rate loan. This loan can lower the risk of high interest rates over the term of their loans.

The loan officers are loan experts. They also are knowledgeable in the agricultural industry and know the ins and outs of buying land. After approving your loan request,  they will assist you in finding the best way to repay the loan all the while making your dream come true.

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