When I speak of a lot, I’m referring to a subdivided piece of land that is zoned for a particular type of use.
Bare land loans can also be secured on large tracks of land that perhaps are agricultural today, but will be rezoned for other development in the future.
For one or more lots, financing can be acquired from a number of different sources, depending on the marketability of the lot and the financial profile of the borrower(s).
In general terms, financing can be secured from 40% to 75% of the market value of a given lot of land.
The variation in leverage amounts has everything do to with the extreme differences from one unique lot to another.
For instance, a lot in down town Toronto that is going to have a construction project start on it right away is going to attract a higher loan to value than a lot outside of a urban community where there isn’t much going on.
Also, the condition of the lot will contribute greatly to the potential loan to value you can secure.
For instance, is the lot fully serviced, partially serviced, or not serviced at all?
Is it zoned for immediate development of what is popular or typical in the local market, or will there need to be an application put in for a zoning change to make it more attractive to the resale market?
Banks and institutional lenders will provide lot financing, but like any bank loan, you have to have the credit and financial profile to qualify.
Private mortgage lenders are the most common source of land lot financing as their focus is primarily on equity in the property with a lower level of concern with credit scores and financial profiles.
That being said, a private lender will still want to know how you are going to be able to service the debt as well as how you plan to pay back a private mortgage that is advanced to you.
Some private lenders will take back an interest reserve from the approved mortgage amount to cover off the monthly interest costs for all or part of the loan term which can be an excellent solution for some one with a lot of equity in a site, but not a lot of current cash flow.
Lot loans and mortgages can be arranged from $20,000 up to several million, depending on the property, market, exit strategy, and equity position of the borrower.
If you require a lot loan or mortgage, I suggest that you give me a call so I can quickly go over your requirements and provide private mortgage financing options that meet your needs.