Financing Your Land Purchase
Seller Financing
When buying land, seriously consider using the owner as a lender. Under the current financial crisis, most banks and other traditional lending institutions are not loaning out money for raw land purchases. Those that do lend have strict requirements which can be costly such as a high down payment, points, origination fees, appraisal fees, title insurance fees etc.
Most owner financing deals are simple and straightforward. Generally the only costs are legal fees needed to draft the appropriate documents. An initial down payment at closing is usually the only requirement.
Using the owner as a lender is also a good way to own a piece of land without paying the full price up front. This allows the new owner to use his or her capital to make improvements which generally adds value to land.
Wilderness Realty specializes in land sales and represents owners who offer owner financing. Call 207-947-7957 for details regarding owner financing packages for our various listings. This is a great way to be a landowner NOW and enjoy your investment for a longer period of time AND during the prime years of your life.
Deed vs Rent to Own
Generally there are two types of owner financing available to buyers of land. The first is contract for deed or “rent to own”. The most notable distinction regarding this financing instrument is that title does not pass to the purchaser until the financing obligations of the contract are fulfilled. Any improvements to the land made by the purchaser are to the benefit of the title holder, the seller.
Mortgages
The other financing method is the amortization mortgage loan. Usually a deposit is required and the remaining balance is paid on a periodic basis according to an amortization schedule. Payments are generally applied to interest first and then principle. Early in the schedule most of the periodic payment goes towards interest. Later in the schedule more and more of the payment goes towards the principle. Title passes to the buyer and the buyer conveys a security interest to the seller via a mortgage.
As long as the buyer makes the payments according the attendant promissory note, title remains as the buyer’s. If the buyer defaults on the payments, then mechanisms in the mortgage are triggered and the property is foreclosed; title goes back to the seller.
Any improvements by the buyer are to the benefit of the buyer, the title holder. This is an important concept for those land buyers who want to build on their property before the scheduled payoff.
Financing Options at Wilderness Realty
Wilderness Realty works with a limited Seller clientele who can offer owner financing using the amortization mortgage loan method. Consequently, owner financing is available for most of our land listings.
The standard financing package is as follows:
- 20% down payment
- 13.5% interest (fixed rate)
- 12 year maximum term
- No penalty for early payment
Use the mortgage calculator below, or on each listing page, to figure your monthly payment based on the sale price of a particular property.
