Vacant Land Loans
Vacant land loans enable customers to borrow in order to purchase land, with the intention of building a home on that land at a later stage.
Most Lenders are conservative in lending on Vacant land due to the fact of when house prices are weak or there is an access of property on the market, vacant land tends to fall in value and takes longer to sell and due to the lack of income as compared to an established property e.g rent. This is particularly true in country areas and remote locations where land prices fluctuate more often. However we do have lenders that will lend to 95% + Mortgage Insurance on Vacant Land for both owner occupied to 95% for investors with Genuine savings or to 90% without. Vacant land is treated in different ways by funders depending on the location and the size of the property.
What are the factors you should think about before applying for a Vacant Land Loan?
- Intention to build: Many lenders consider someone who is building on the land right away or within a year to be a lower risk than someone who has no intention to build. Think about what you will be doing with the land once you have bought it. You might think that this is irrelevant but it is actually incredibly important when it comes to discussing your loan needs with your lender. For instance if you plan on buying land and using it for your own leisure purposes such as fishing or horse riding you will not be making any money from it. This means that a lender would look on your loan as having a lesser return than a loan for land which was going to be developed. Land that is developed has much more equity in it than undeveloped land which makes the loan less of a risk in the eyes of a lender. If you are not interested in construction then the bank may consider you to be a speculative investor and depending on their policy, they may decline your loan.
- Do you have Sufficient Borrowing Capacity to Construct: Think about whether or not you will need to take out other loans to develop the land that you have bought once you own it. If this is the case you need to make sure that you are able to take out another loan in order to develop your land.
- Services: The land must be able to be connected to the electricity grid without excessive costs.
- Access: The land must have easy access using an all weather road.
- Location and Zoning: Land inside major cities and regional centres are financed quite easily. Rural vacant land in lifestyle locations, large acreage, hobby farming regions or small towns is generrally not accepted by most lenders and with lenders that accept this security the lvr’s are usually below 80% LVR.
Please complete our Express Enquiry Form or Phone Direct and you can discuss your situation with an expert.
If you wish to proceed, then we will help you to complete all the necessary paperwork and liaise with the lender on your behalf. This will include the completion and submission of your home loan application and the on-going communication between all parties until your home purchase is settled.