December 07, 2001
By: Bev Dodd
Land loan: Variable options, low rates
Think of the construction size when out looking for property and then applying for a land loan. A home equity loan might be an option for a land loan if the land is an investment. We'll discuss this more below.
Before you start looking for a land loan and a piece of property or an available lot, find out what size construction loan you can qualify for and any restrictions or limitations you may have to abide by. With that information in hand, it's easier to find the land you need and make an offer. Never make any commitments to purchase and build or close escrow before you have solidified your financing needs.
IRS Section 163 allows lease payments for land under a home to be deducted. The ground lease must be for at least 15 years including renewal periods, be freely assignable, and contain a future option for you to buy the leased land. Unfortunately, this doesn't apply to renting land in a trailer court. Contact your IRS agency for any new changes before you get your land loan, and avoid any problems or surprises.
If you have the available cash - you are ready to go! If you are going to need to borrow some of the money for a land loan, you will need to plan the way you will obtain it. If you own a home, a "home equity" loan is a very good option. The interest rates are reasonable and the interest may be tax deductible. Any other financing will require at least 25% down. All our land loan lenders can help you with your options.
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