Guide to Land Mortgages

A land mortgage is quite different than a home mortgage since there is a lot less value than a real estate loan. The type of mortgage is not as attractive to lenders because the land has no real value until the property has been developed. This means that the value of the property can fluctuate more rapidly than the housing market and leaves the lender at risk because there is not a lot to be gain. Bankers don't have as much reason to give you a land mortgage because unlike houses which general hold their values a land loan is highly unpredictability. A banker might hesitate to grant a loan on land because of this uncertainty and the fact that he may not want to own the land, if you can't repay the money you borrow.

If you are in the market for a land mortgage you may want to buy your land in an area that is in demand or likely to have growth potential in the near future. Some of the best areas to purchase land today are in San Diego County in the Rancho Santa Fe neighborhood known for its zip code or you might want to take a look at Malibu which still has quality ocean front property. Aspen, Colorado could be a year round paradise and you could pick up land there for any expansion purposes. Sagaponack, New York located near Long Island in the Hampton also offers good land prices as well as both Jupiter and Gasparilla Islands, Florida. These are just some of the places where good quality land can still be found. However, you should keep in mind that a land mortgage is rarely given on a long term basis like the 30 to 40 year mortgage you see with a home loan. Instead, it will be short term like 10 to 15 years, if that. Also, you will probably have to make a larger down payment or you ma! y want to pay in cash.

You should also be aware that at times a bank will not loan money if they don't have assurance that the property can be developed for the purpose you intend. It may not be safe or have the zoning necessary so it's always wise to have the property inspected.

If you borrow the money, you may be required to give collateral such as another property since the lender will want assurance that you are not going to skip and leave him holding the note with something that potential has no value. Borrowing from a local bank will be your best bet because the lender will want to keep an eye on the land to be developed. If unable to obtain a short term land mortgage from a local bank it might be wise to look to family and friends or to the land owner himself who could possibly be willing to finance the mortgage.


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