Understand Land Loan Down Payments, Interest Rates, and Loan Terms

What Is a Land Loan?

A land loan refers to a type of credit used to finance the purchase of a plot of land, whether for residential or business purposes. It is different from a traditional home mortgage in several ways. Here’s an overview of land loans and their distinguishing features:

A land loan operates differently from a standard mortgage due to the following reasons:

  • Risk and collateral. Land loans are considered riskier for lenders than mortgages because the land is typically the only collateral. Unlike a home mortgage, where the house acts as collateral, land loans lack a physical structure to secure the loan.
  • Higher interest rates. Due to the increased risk associated with land loans, lenders often charge higher interest rates. Although a 1% or 2% difference in interest rates may seem minimal, it can accumulate over the loan’s duration.
  • Shorter payback periods. Land loans typically have shorter payback periods compared to traditional house mortgages. While some lenders may offer 30-year land loans, it is common to find lenders capping the payback period at 5 or 10 years.

How Do Land Loans Work with Elegment Land?

Elegment Land makes land loans easy and low risk, thanks to our simple process and offer terms.

The process couldn’t be easier.

  1. Choose your plot of land. We only require a deposit of around 10%-20% of the total purchase price for most lots.
  2. Make your payment online safely and securely.
  3. Chat with our team about a finance option that works for you. We’ll set it up for you and send the paperwork to you digitally for you to sign.

What Are the Down Payment Requirements for Land Loans with Elegment Land?

Elegment Land always aims to make owning your plot of land as easy as possible for our customers. This includes how we structure our down payment requirements.

  • Typically, we only require 10-20% of the total sale price of the land as a down payment, but this will vary depending on the property. This is so that our plans remain affordable for all potential buyers.
    We typically use a deed of trust as collateral for land loans. This allows us to provide warranty deeds and full land ownership to our customers from the moment the paperwork is signed.
  • You may notice some sellers offer a down payment of just $100. These sellers often only allow buyers to use the land once all payments have been made in full. With Elegment Land, you have use of the land from day 1.
  • Best of all, it’s easy to pay your deposit via the Elegment Land website. All payments are safe and secure.

How do Land Loan Interest Rates Work for Elegment Land?

When it comes to interest rates for land loans with Elegment Land, several factors determine the rates offered. Here’s an explanation of how interest rates work for land loans with Elegment Land, along with a recommendation for loan options:

  • Elegment Land sets its interest rates based on similar commercial mortgages offered by retail banks. The interest rate falls between that of retail bank land loans and typical credit card interest rates.
  • It’s important to note the interest rate for land loans with Elegment Land will be higher than that of typical 30-year house mortgages. Land loans from Elegment Land typically have shorter durations, ranging from 5 to 20 years.

To provide guidance on loan options, Elegment Land recommends the following order of preference for buyers:

  1. Your bank’s land loan. If your bank offers land loans, it can be a suitable option to explore.
  2. VA loan. VA loans offered by the Department of Veteran Affairs can be a viable choice if you are a veteran planning to build a house on the land.
  3. Your bank’s home equity line of credit (HELOC). Utilizing the equity in your existing property through a HELOC can provide favorable interest rates.
  4. Elegment Land’s owner finance options. Elegment Land offers owner financing options, providing flexibility and convenience.
  5. USDA loan. If your income meets the requirements and the land is located in an eligible rural area, USDA loans can be an option for building a house on the land. You can check your eligibility.

Elegment Land does not recommend using credit card debt to buy land.  We aims to provide affordable financing options to help buyers avoid high-interest loans and make land ownership more accessible. In striving to assist land buyers in securing financing aligned with their needs and financial goals, Elegment Land offers competitive rates and recommending alternative loan options.

What Are the Loan Terms for Land Purchases with Elegment Land?

The team at Elegment Land works hard to ensure competitive and attractive rates for our customers. Here’s what you can expect:

  • Secure online payments. Elegment Land makes it easy and secure to pay for land online. You can rest assured your transactions are safe and efficient.
  • Easy financing options without credit checks. Elegment Land understands not everyone has perfect credit. That’s why we offer easy financing options that don’t require a credit check. This means you can still buy land, even with bad credit.
  • No prepayment penalties. Unlike some other lenders, Elegment Land doesn’t charge prepayment penalties. This means you can pay off your loan early without paying extra fees. This can save you money in the long run.
  • Issuance of a county recorded deed from day one. You’ll receive a county recorded deed when you buy land from Elegment Land, meaning you’re the legal owner of the land from day one. This gives you peace of mind and security in your investment.

If you need more information on our safe and easy financing options, contact our friendly team to discuss more.