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Best type of loan for a lot of land in suburban neighborhood
Posted on 6/18/12 at 7:02 pm
Posted on 6/18/12 at 7:02 pm
My options with the lot are to wait a year or two and let prices continue to rise (then sell) or wait during the same time frame and just build. I can get an interest only loan or a type of balloon loan. Anyone have experience with this?
4
Posted on 6/18/12 at 7:13 pm to saderade
We got a lot back in 08. The rate was tied to the LIBOR. We were paying like 6.25%. I believe it was set up as a 20yr period. We are now getting toward the end of the construction. The construction loan is an interest only loan and after 1 yr, if we haven't converted to a permanent mortgage, we own the full amt of principal. The const. Loan is also around 6%. We are definitely looking foward to converting over to a traditional mortgage so I won't be paying so much interest.
Posted on 6/19/12 at 7:44 am to saderade
You'll pay rate plus a floor (1-2%) on a construction type loan, which will require 20%. If your looking to flip, say lot is 100k, you put down 20, finance 80k at 5% (rate + floor), that's 400 a month interest only, 4800 a year in interest only payments. Add another 50-100 a month for maintenance. Land speculation can be a risky investment IMO.
If you're building, you'll convert (refi) that loan into a traditional mortgage when ready to close on house. With rates where they are and will be until 2014 by most experts, I think if you can swing it this is the play I would do. My construction will be finished in July, locked 60 days out at 3.625 on 30, 0/0. Cheap money FTW
If you're building, you'll convert (refi) that loan into a traditional mortgage when ready to close on house. With rates where they are and will be until 2014 by most experts, I think if you can swing it this is the play I would do. My construction will be finished in July, locked 60 days out at 3.625 on 30, 0/0. Cheap money FTW
Posted on 6/19/12 at 9:45 pm to saderade
If you plan on holding the for a while, expect to have it amortized over 5, 7 or 10 years. Banks do not like interest only loans on land or lots if there is no immediate plan because it produces no income. Now if you were to use the lot for for personal residence, that's different.
Posted on 6/20/12 at 7:42 am to Cool J
quote:I found out that our offer was accepted on the lot. The main branch manager of the bank actually recommended I go with an interest only loan. Basically, one year from now I am going to research how much empty lots in this area are going for and decide if I want to sell (prices have continued to rise in this area consistently) or build.
Banks do not like interest only loans on land or lots if there is no immediate plan because it produces no income
Posted on 6/20/12 at 8:13 am to saderade
I would not be paying interest just to hold a lot. If you're in it cash then fine, but makes no sense to do this IMO.
Posted on 6/20/12 at 12:35 pm to The Mick
What's the typical down payment for a lot loan? I've heard 20%, but was curious if 10 or 15% is a possibility? Looking at lots around 125-150k and was hoping not to have to put down 30k if possible..
Posted on 6/20/12 at 12:46 pm to LakeviewSaint
20%. In a year paying interest plus closing fees he'll be lucky if break even, BICBW. Need to hold that lot 5 years plus, and be in cash as mentioned earlier. Hope you are ready to build
This post was edited on 6/20/12 at 12:47 pm
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