If you’re looking for house lot financing for a lot that you’re wanting to acquire or for a lot you already own, the location of the lot is going to be very important with both institutional and private mortgage lenders.
In a very active market area, its not that difficult to get financing for vacant lot of 50% loan to value from a bank or institutional lender, provided that the real estate is in a major market with regular sales occurring for similar lots.
As you move away from major centers, banks and institutional lenders will be less interested in the deal in general, even at higher rates and lower loan to value ratios.
Private lenders will also finance house lots, provided that they know the local market and are again comfortable that there is a good resale market present for the specific type of lot you’re trying to finance.
If there isn’t a strong resale market in place for house lots in your area, then the next important element that needs to be present is a well defined plan for either future repayment of the loan at the end of the term or a plan for future development that will increase the value of the property.
Any lender that is providing house lot financing is going to be in first mortgage position. So if you improve the lot by either adding servicing, landscaping, or building construction, then the value of the underlying security is going to increase, providing a higher loan to value for the first mortgage lender and increasing the potential market interest in the property as a developed or semi developed lot.
Another option would be to have a recourse agreement for a mortgage lender whereby a third party agrees to purchase the property from you at a set price and pay the proceeds directly to the lender in the event of mortgage payment default. This can provide the additional security the lender may need to finance the house lot in the event that the market is not viewed to be strong enough otherwise to support a mortgage financing decision.
If you require house lot financing, please give me a call and I’ll quickly go over your requirements and provide house lot financing options that meet your needs.