Whether you’re investing or buying land to build on it later, vacant parcels are an attractive commodity. Unlike houses, apartment units and condos, this type of real estate has less competition with fairly decent supply across Victoria. This means there’s a good chance you could find great deals, especially in new developments in emerging Melbourne suburbs.
Financing has always been a tricky part of land ownership, however. Many believe it’s the same as mortgage — only it’s hugely different.
Regardless of your purpose of buying vacant land for sale in Hoppers Crossing, Preston, Footscray or Bentleigh, westbrookestate.com.au and other real estate providers noted that you must at least correct some of the most misguided assumptions towards land loans to shop wisely right from the start.
You Can’t Build on It Right Away
Contrary to popular belief, the sooner you intend to construct something on it, the lesser risky a borrower you become.
Any experienced lender would agree that vacant parcels tend to be harder to sell in the market than finished properties. In addition, they’re more susceptible to depreciation over time. These are the reasons land isn’t the best of collaterals.
If you can’t show any clear plans to build on it, a conservative lender would quickly deny your application.
Banks Are Your Only Source of Financing
Choosing the land is already a difficult task, what more when it’s time to pay for it. The fact that it’s relatively difficult to obtain a land loan through banks, vendor finance has become a trend. Many land sellers provide financing in order to secure sales faster. You may have to pay a slightly higher interest rate, but the small difference could be all worth it to buy the lot you want.
A Big Down Payment Is a Must
If you qualify, many lenders are willing to let you borrow up to 95% of the land price. This means your deposit only needs to be 5%. This isn’t a guarantee, however. In general, the size of block would dictate the amount of money you have to put down.
Much like other financial products, each land loan has a unique set of terms and conditions. You may not understand these special conditions overnight, but they’re less misleading or confusing without certain misconceptions on your way.