Do you have a vacant land and looking for financing? You need to know that many renders are very skeptic about investing in bare land as it might sit for a long time without being developed.

Financing Options Available

While this is the case, the cool thing is that you can get approved for a conventional mortgage if you have a healthy income and high net worth. All you need to do is to approach the rending institution and ask for the financing. While you will get a loan, you will be required to pay a higher interest rate than you would when buying a home.

If you are an average earner and you don’t have money to buy the land, you should shop around and approach different lending institutions and try to tap into non-traditional sources of funding. For example, you can ask the institution to give you a private mortgage.

This is a mortgage where a private person or company backs your loan. While the loan will have a lender fee and a higher interest rate, it will help you to get the land that you have always wanted.

If you are planning of developing the land immediately you should consider taking a home equity line of credit on your current principal residence and buy the land.

How to Get the Financing

You should start by applying for the loan. Remember that the lender will want to see your building plans, cost estimate and construction contract. The best people to approach for the loan are the local banks. The cool thing with local banks is that they are aware of the area. In some cases they might know the land that you want to buy.

You should prepare yourself to make a down payment of between 20-30% of the land and construction costs combined. Since lenders consider financing a vacant more risky, they can even ask you to make a down payment of 50%.

Buy Now, Build Later

While many people buy land for future development, there is the risk of the planning and environmental rules changing. For example, there are very many landowners outside Toronto that have been barred from developing their lands due to the Greenbelt registration.

If you are planning of buying land now and build in the coming 20 years you should note that you might not be able to do what you can today. Always remember that vacant land is jut vacant land and isn’t a good investment if you can’t do what you want with it.