Want to buy Land Loan? 3 Best Financing options
Buying a new home could be challenging for some people; however, purchasing an undeveloped plot of land to construct your home could be much cheaper. Purchasing a plot of land could minimize downsizing of your older apartment, and help expand your ideas for a new house in a traditional taste and requirement of your own.
Land purchase Loan is the best option to buy a piece of land if you are short on cash. This will allow you to buy the land and start repaying the debt in installments over time. Before buying land, you need to consider the type of property you want to purchase.
There are two types of land available for purchase: Lot-land and Raw-land.
A Lot-land means a type of land which has been assigned as a residential construction zone, whereas a raw-land means the land which is in its natural state.
The following are the three best financing options you can choose from to buy land.
Lot-Land Loan
If you want a land that has been linked with county roads and has proper electricity, sewer, and water systems, then you need to qualify for a Lot-land loan. A purchaser needs to pay a downpayment of up to 20% on the land's total value.
Credit Unions, Regional or National Banks issue these types of loans. It is essential to check with the planning department of the local authority to ensure the future of the immediate neighborhood.
Property values could rise or fall with the construction of new buildings or roads.
Lot-land loans can be purchased with the following rate of interest -
Up to 30Lakhs at a rate of 9% per annum.
75 Lakhs and above at a rate of 9.30% per annum.
Raw-Land Loan
Buying land that does not have access to electricity, sewer lines, water supply, and even roads are termed as Raw lands.
The purchaser of the land is solely responsible for the cost of connecting the plot of land with public amenities and utilities. Raw-land loans are considered to be more volatile by lenders; hence, they usually require a 50% downpayment on the total land value. Few banks offer Raw-land loan, and finding one could be a challenging issue. Private lenders also can be a choice for land financing.
Raw-land loans can be purchased with the following rate of interest -
Up to 30Lakhs at a rate of 8.5% per annum.
75 Lakhs and above at a rate of 9.40% per annum.
Personal Loans
If you are not eligible for a land loan or you are unable to pay the required downpayment for the loan, you could always try another option, such as a Personal loan for financing. A personal loan can be expensive in purchasing land, and it has a shorter repayment period. The interest rates on personal loans are higher than the other types of land loans.
The credit score of the borrower plays a vital role in applying for a personal loan. Lenders generally do not allow personal loans for borrowers with a credit score of less than 650. Interest rates for personal loans can go as high as 13% per annum, which means a personal loan of Rs.1 lakh for a term of five years would amount to Rs.1.37 lakh, which means you will be paying Rs. 20,000 more than a conventional land loan.
Constructing your home in a perfect plot can be an exciting decision, with the help of land purchase financing loans, you can get the best finance deals and start saving your expenses. Before investing in a land loan, you should always remember to double-check any plot of land for zoning and land-use restrictions.