Purchasing or investing in large pieces of land may be a “high risk, high reward” situation for your client. Whether they choose to invest in large land areas for personal or commercial development or want to sell it at a higher price when the government rezones the land, it can be an excellent financial decision. However, large land areas are considered high risk by most lenders, which may make it more challenging for them to secure a loan.
Lenders’ Criteria
In general, most lenders have standard criteria your client must meet before they can secure a loan. They can increase their chances of securing a large land loan by putting a downpayment of 20% or by having a guarantor if they cannot afford a large deposit. Lenders may also require your clients to have 5-10% of the property’s value in genuine savings. Lastly, your client should have stable employment, a good income, good credit history, and an above-average credit score.
How Much Can They Borrow?
How much your client can borrow will depend on the size of the land.
- For commercial farms, they can borrow 60% of the property’s value.
- For land over 60 hectares, they can borrow 70% of the property’s value.
- For land up to 60 hectares, they can borrow 80% of the property’s value.
- For land up to 2.2 hectares, 11 hectares, or 50% hectares, they can borrow up to 95% of the property’s value as long as a house already exists.
- If they have a guarantor, they can borrow up to 100%of the property’s value.
It is important to note that these borrowing amounts are just guidelines. Lenders will assess each loan individually while also evaluating the location of the land, access to roads and the electric grid, the property’s zoning codes, the land’s purpose, and whether your client intends to build. Most lenders are more likely to approve loans for large_land areas near cities with easy access to roads and the electric grid.
The Mortgage Street Difference
Your client may find it challenging to secure a significant land loan. If your client wants to secure a large_land loan, consult with us. We can help you secure financing quickly while seeing if your client fits the criteria. As a non-bank lender service, we can provide opportunities for your clients to receive loan approvals for loans most banks consider “high risk.”