Building a house from the ground up can be a fulfilling experience for every homeowner. The first order of business when it comes to home construction would be to buy the land to build it upon. Don’t know where to start? Consider the city of Donnybrook, which has excellent plots ofland for sale in VIC for every type of home. Whether you’re looking to build a small, low-maintenance home for yourself or a large family home with a spacious backyard, you’re bound to find a lot that suits your needs.
When you’ve decided on where to build your house, the biggest concern would then be how to finance your purchase. Purchasing a plot of land can be costly, so you might have to apply for a land loan to help cover the expenditures. A land loan is quite different from a traditional mortgage, and banks are often more conservative with them. Here are the most common ones you can look into:
Local lenders and credit unions
Local banks and credit unions are much more likely to offer you a land loan than a large national bank. They may even offer you more favorable terms since they’re more familiar with the area and can properly assess the value of the land. You’ll be required to present a loan package, complete with specifications and plans for the land you’ll be purchasing. You’ll also need to present your personal financial information to be able to prove your creditworthiness.
You might be able to apply for short-term financing from the person who is selling you the land, if they’re willing to offer the option to you. There is risk involved with this form of loan, though, so only consider this method if you don’t qualify for any other type. Since most sellers can’t provide a portfolio of loans like a local bank or credit union can, you might have to deal with a costly down payment and high-interest rates. You also might not be able to receive a suitable repayment term. It’s still worth it to try since there’s a chance that you might be able to negotiate a good deal.
Home equity is your home’s interest or the part of your property’s worth that you truly own. This is only applicable if you already have a house apart from the new one you’ll be building from the ground up. If you’ve accumulated significant equity in your home, you might be able to borrow against that equity by way of a second mortgage. Through this method, it’s possible for you to cover the cost of the land without the use of additional loans. Obviously, this is a risky method if you feel that you might be unable to make payments on the loan since you’ll be using your home as collateral. It’s good to plan ahead if you opt for this approach.
If you have more ambitious or unusual plans for the construction of your property, you might want to consult with a specialized lender who can address your intended use for the land. These types of lenders will be willing to work with you to understand the benefits and risks associated with your reasons for land ownership.
There’s no one-size-fits-all land loan for everyone, so do your due diligence and look around for the best one for your needs.