Loans for land are much harder to obtain than loans for homes or other real estate property, especially raw acreage with no plans for improvement. Lenders consider this type of property to be a speculative investment and will require a higher down payment and most likely a higher interest rate. Those who would like to borrow funds should have a relatively easy time if they have immediate plans for construction on that acreage. Also, loans for land that has been prepared with a septic tank, sewer system or other utilities, are much easier to obtain than for property that has not been improved.
People who can present a plan for construction or acreage improvement may obtain lending even when it has not been used for anything, such as farming or business use. A loan for land only is especially risky because the value of land that is not improved or built upon is considered to be unstable compared to the value of the property that has a home or other structure on it, or at the very least has utilities or a sewer system. Therefore, it is nearly impossible to obtain a loan for land of this type without a very large down payment. Another instance in which one may obtain lending only is if they are using it as an investment property with anticipation that it will become popular and the value with increase.
The type of lending depends on the type of property. Loans can be for acreage that is raw, partially improved, or loans for land with plans for improvement or construction. To obtain lending with plans for improvement, there is usually a timetable that must be adhered to. This timetable may be planned solely by the borrower or in conjunction with a land developer. These are the most common types.
Lending for acres is similar to lending for homes or commercial properties. Loans for land typically have fifteen to twenty year terms and are paid on a monthly basis. The interest may be at a fixed rate or an adjustable rate, just as with a home loan. Also, as with any other lending, those who have a bad credit history will pay a higher interest rate on a loan for land. Acres can be a great investment whether used for profit or to build a home. "The first of the first fruits of your land you shall bring to the house of the LORD your God." (Exodus 34:26)
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