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Old 02-04-2010, 07:11 AM
 
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how hard is it to get a land only loan in central maine?

would the rates be comparable to a regular home mortgage?

would it be better to get owner financing?

i would prefer a longer loan term to keep the monthly payments down, and it seems owners don't usually go for anything longer than a 15 year term
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Old 02-04-2010, 07:55 AM
 
Location: North of Boston
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Your best bet is to find a local bank to work with.

If you plan to just buy the land and hold it for a while then expect to put 30% down and pay 1% higher than a typical house mortgage.

If you are planning to build on the land soon then you will get a construction loan to pay for the land and the house construction. These loans are typically interest only for the period of construction (generally no more than a year) and then the loan will typically convert to a traditional fixed rate or adjustable mortgage when construction is complete. The amount of the loan is based on the estimated future value of the constructed home and banks typically want at least 20-30% down in these situations.
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Old 02-04-2010, 08:25 AM
 
Location: Northern Maine
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Banks usually want 50% down on a land loan and they want to see a building started within six months. Here's why; Very often, more than half the value of the purchase price is in the trees. The buyer could walk away and abandon the property after cutting the trees. The bank is left holding the bag. It's a rare bank that will loan money on land at all. They have been down this road. These facts are based on wooded lots. A lot in a residential subdivision is another matter.

Some commercial banks loan money on wooded lots. Recent interest rates run as low as 8%, but more often they run 10 to 12%. This is why many land buyers take out home equity loans. The interest paid is tax deductible and if the buyer builds a camp the following year he can roll the whole deal into a mortgage. Home mortgages are at 5% now. I have never seen a land loan at 6%.

Owner financing usually takes 20% down, sometimes more. There will be a provision in the mortgage that any proceeds from a timber harvest goes to the seller to pay down the principal. This would not apply to cutting wood for your own use such as building a road into the property, firewood, fencing or building a pole barn.
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Old 02-04-2010, 11:22 AM
 
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To answer your questions (it sounds like a houselot rather than timberland):
1.) It ain't easy if you don't have a relationship with the bank, have perfect credit, or tons of money. Sure, they'll lend you money if you deposit a like amount in their bank.
2.) No. The risk that a borrower might abandon a piece of land as compared to their primary residence, dictates a considerably higher interest rate and much poorer terms. It's all about risk.
3.) Yes.
4.) It's all a negotiation. You make an offer, the seller can accept, reject or counter-offer. Silence indicates rejection. And most sellers are aware of the problem with obtaining land loans. Anything beyond "I give you cash, you give me the property" is a negotiation.

We got 20% down on a land loan from Bangor Savings bank, 7.5% fixed, 30 year term, 7 years to when the rate can "adjust" annually. This was in . . . 2007 I think. But I talked them into a "blanket" that took in property in both Hancock Penobscot Counties, including a home, so the terms don't really apply when everything was finalized. I believe they'd go 20% down, 20 years, ALWAYS with a balloon or adjustment 7 years or so down the road. But it also depends on who you are and how they view their risk. As I recall, Machias Savings Bank did better on the first offer.
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Old 02-04-2010, 12:35 PM
 
Location: WV and Eastport, ME
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When we bought land in Maine, the Real Estate Broker told us that most land sales are not financed through a bank, but are cash sales.
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Old 02-04-2010, 01:05 PM
 
Location: Gorham, Maine
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I haven't done many with clients, but all of mine have been cash sales.
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Old 02-04-2010, 01:05 PM
 
Location: The Woods
14,427 posts, read 13,762,825 times
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Land loans are hard to get anywhere. You'd be better off with owner financing if you don't have a lot of cash to put down (with owner financing always be a bit cautious and do your homework).
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Old 02-04-2010, 03:06 PM
 
Location: 3.5 sq mile island ant nest next to Canada
2,924 posts, read 3,233,028 times
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All good info that I didn't know. Hadn't really thought about it. Have to inform DD and SIL. They plan to pick up some land.
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Old 02-04-2010, 04:36 PM
 
Location: North of Boston
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Quote:
Originally Posted by arctichomesteader View Post
Land loans are hard to get anywhere.

If you have a steady income, good credit and 30% down, that is not a true statment at all.
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Old 02-04-2010, 05:32 PM
 
Location: The Woods
14,427 posts, read 13,762,825 times
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Quote:
Originally Posted by gf2020 View Post
If you have a steady income, good credit and 30% down, that is not a true statment at all.
Banks don't like to loan on land, particularly rural land.
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