First, there do tend to be several sources for property financing in most areas. The more developed the property and the property location in general, the more land mortgage options will be available.

Land can be purchased for a planned construction project by a home builder or home owner, or for speculative reasons for individuals focused on buying and flipping real estate properties for a profit.

In either case, for residential serviced lots within well developed areas, the loan to value from an institutional lender will likely range from 65% to 75%.  If the property has a planned construction project where the construction financing is already arranged, the related financing cost for a bare land purchase can be as low as prime plus one or two from an institutional lender.

If you take the same type of scenario mentioned above, and moved it into a rural area where only well and septic is available, the financing percentage will drop to 50% in most cases.

The private mortgage market also provides funding for bare land purchases with similar leverage requirements. For well developed sites and locations, private mortgage lending rates will start at 10% and go up to around 14% for unserviced land.

Some private lending sources for bare land will require that you have a plan to build in the near term and won’t finance purely speculative purchases while others will if they like the long term potential of the property.

If you’re thinking about investing in bare land for building or speculative reason and will require a land acquisition financing facility, then I suggest that you give me a call so that I can quickly determine your available options and work with you to find a mortgage that meets your needs.

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