Though investing in vacant land is among the most lucrative options today, very few people are taking advantage of this real estate investment in Australia. Many obstacles are causing this reluctance, but financing is generally the most significant. Only a few mortgage lenders are willing to fund the purchase of vacant lots rather than constructed properties.
You, therefore, need to liaise with the right property developer to get financing when investing in land in Melbourne offered by companies like Modeina. This guarantees you work with a lender with a good understanding of the risks and opportunities in purchasing vacant land. Here are some of your best financing options:
Your land’s seller advances this form of funding. Seller financing needs a large down payment but allows you to still maintain a lien on your land. The rates are negotiable, but interest is generally higher for these loans compared to conventional loans. Seller financing loans are typically short-term, not exceeding about five years.
These refer to mortgages that remain unsold after underwriting. They are sold by large banks to serving agencies and specialty lenders and don’t conform to any secondary requirements in the market. Borrowers with good credit ratings qualify for good loan terms and favourable down payments. Some portfolio loan lenders will combine their loan with construction loans to get you started on your project.
Home Equity Loan
For those with an existing home with considerable equity, you can tap into this into capital for your land purchase. There exists no down payment with this alternative, and you’ll typically have low interest rates. Should you, however, default on a home equity loan, you can lose your primary home.
There’s no single best loan option for an investor. Discuss with your property developer on the ideal choice for your situation before signing on any loan agreement. The right loan will significantly ease your land investment.