People are much more likely to walk away from a land loan than a mortgage, potentially leaving the lender with an unimproved parcel of land which they will have to sell to recoup their losses. Undeveloped land, on the other hand, doesn't deliver the same degree of investment security for the creditor. Moreover, a house on a lot has greater value on the open market, and makes for a more secure form of collateral. Borrowers are much less likely to walk away from a home loan, particularly if the property is being used as a primary residence. But a short primer should help you understand how land loans work, and what your options are when looking for a lender.īanks and other lenders tend to view land loans with a wary eye, and consider them to be more of a risk than a standard mortgage. If you've never purchased land before, you may find the process a bit more challenging than you expected. Land loans are unique financial products, and they are handled differently than mortgages and other secured loans. But borrowing money to purchase raw land is not quite that straight forward. Unless you're in a position to pay cash up front, you'll need to borrow some money to finance the purchase. Everything You Need to Know About Land Loansīuying a parcel of land, either as a long term investment or on which to build a new home, is not quite as simple as you might think.
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