How does financing work on a residential lot?
February 21, 2009 by admin
Filed under Renting & Real Estate
D B
There are 2 residential lots in this neighborhood that is up and coming. I want to buy the two lots but sit on them for about a year or so. How would the financing work? Do you finance something like that as you would a 30 yr mortgage?
There are 2 residential lots in this neighborhood that is up and coming. I want to buy the two lots but sit on them for about a year or so. How would the financing work? Do you finance something like that as you would a 30 yr mortgage?
You get a lot loan from a lender. The interest rate will be higher than a traditional mortgage. Typically the terms are shorter, I have seen several 10 year land/lot loans, a few 15s.
Not as much money around for lot purchases. It’s a higher risk deal for the lender so they lend at higher rates and lower loan to value ratios. Also usually have a shorter term. Keep in mind that your cost to originate the loan, interest during the term of the loan and taxes while owning the lot add directly to your cost of the lot. Only reason to do this is you are buying way under market, or these lots are going to appreciate more than these added costs.