Factors to consider when getting your land loan
Here’s what you need to know if you are looking for a loan to purchase a vacant block of land without plans to build right away.
What is a land loan
A land loan (or a vacant land loan) is a home loan where borrowers will seek financing from a lender to purchase a block of land. The intent with seeking a land loan is to eventually build a house on the block of land one day without it being determined in a specified amount of time. Therefore unlike most home loans which are used to fund the purchase of a land + property package, a land loan is purely to gain ownership in a block of land.
Land size
When looking to take out a home loan for land purchases, the size of the land is important as it will determine the deposit needed to get the funds.
These limits can vary depending on the lender, you could borrow up to 95% of the property’s value if the land is up to 11 hectares. Whereas if you are looking to purchase a block of land larger than this you will usually need at least a 20% deposit.
Location
Where the land you are looking to purchase is located is an important factor that will go into securing your funds as the access and zoning regulations will become a part of the assessment process.
For example a block of land in a capital city or regional centre that is serviced by sealed roads may be viewed favourably over land in remote locations with no proper road access for standard vehicles. The zoning regulations of your block of land are important as you need to ensure that the land is zoned for residential use.
Registered or unregistered?
When buying a block of land, it is important to understand if the land you are interested in is registered or not, as lender’s will not approve funds on unregistered land.