Buying real estate property usually does not come cheap. You have two options if you want to buy a property: pay in cash or avail a loan. In most case, it’s the latter that a lot of home buyers choose. For one thing, getting a loan is a more practical and somehow convenient solution if you are planning to buy real estate property.
Getting a loan to buy a house and lot can be easily done as long as requirements are met. However, buying land for sale in Geelong area or elsewhere through loans is another story. This is because a lot of lenders perceive land buying as risky. Hence, securing a loan approval for your supposed lot purchase may not be as easy as it seems.
The potential risks of land loans
Getting a loan to buy land only is different from buying a house and lot, of which the latter is called a home loan. Experts say you cannot avail a home loan if you are buying a lot only. Thus, you may need to get a land loan instead. However, you can expect to encounter some challenging when getting a land loan.
As mentioned, lenders may find lending money for a land purchase somewhat risky. For one thing, it can be challenging to determine a land’s total value and its overall market demand. On the contrary, it can be easier to determine a house or condominium’s estimated value and can be resold even after foreclosure.
Unfortunately, there a lot of cases wherein raw landowners decide to stop paying off the loan due to some reason. Land only can be harder to sell than a house, which explains a lot of lenders’ apprehension in terms of giving out land loans. That is why some lenders may charge higher interest rates or require shorter payment terms for land loans.
Land loans you can consider for your planned land purchase
There are different land loan schemes you can choose. Each of these options has its own features and terms that can benefit you and your current finances.
1. Credit unions and community banks
Experts suggest availing a lender that is near the lot you are planning to buy. It is more likely that these lenders are more familiar with the lot space and are more likely available for property evaluation. These financing institutions can also offer more time for you to repay your loans.
2. Small Business Administration (SBA) 504
This is applicable if you own a business and planning to use a piece of land for your business venture. This type of loan may give you up to 20 years to repay your debt, and interest rate may depend on the existing market rates.
3. Financing c/o the seller
There are some companies or individuals who are willing to provide a short-term payment scheme. However, you can expect to have higher down payments and down payment.
Real estate is a major investment, so it is best to consider your financing options carefully so you can get the most out of your money.