The process of financing bare land starts with the exact type of real estate you have to work with.
For instance if you’re talking about bare land in a rural area that is completely undeveloped in any way shape or form, the financing amount that could be available may be as low as 40% to 50% of the as is market value of the property.
Contrast that to a fully developed lot in the middle of a built out urban area where the loan to value you can secure can get as high as 75% of the fair market value.
Both banks and private lenders will consider bare land loans, but in keeping with all bank or institutional lending, you would have to meet all the typical lending requirements such as credit rating and cash flow to service the debt.
Most bare land mortgages are provided by private lenders who clearly understand the value of the land and its resale market and are not afraid of having to sell the land off in order to recoup their investment if required.
From a lender’s point of view, they would rather finance a piece of property that is being acquired versus providing financing for bare land real estate that you already loan.
This is because a market value transaction has occurred whereby someone is buying and someone else is selling at a negotiated price versus having to rely on a market value appraisal where there may not be a lot of strong comparable sales to establish value from.
The more the land has been improved and/or the closer it is to further development, the more likely it will be to locate and secure a lending source.
Because the majority of these types of transactions are provided by private mortgage lenders, it makes sense to be working through a mortgage broker with experience in bare land financing as the private lenders that do these types of deals can be sometimes hard to locate with broker assistance.
But a mortgage broker can be just as helpful if you want to try go through a bank or institutional lender as those that are prepared to do these types of deals can also be hard to find.
If you’re in need of a bare land loan for acquisition or development, I suggest that you give me a call so I can quickly assess your requirements and provide available land financing solutions for your immediate consideration.
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel