Buying land - rates and years

[deerhunter93]

My family is starting to get more serious about buying a hunting property and I know the best way to find this out is to go talk to a lender but what are some interest rates and loan amounts/years for recreational ground currently? Is there a set percentage needed for a down payment? Are there any other factors to keep in mind financially when buying a place?

Thanks for the info!

 

[4DABUCKS]

Most lenders will want at least 35% down if it's a 50/50 farm. (50% income/50 timber).
If it's close to 100% tillable or income producing you can buy for 25% down.
It's a little more difficult to find a bank that will do a fixed rate for 20-25 yrs. There are some out there like FCS but they normally require @ 40% down payment.

 

[MO-APE]

You will do best working with local banks close to the property or a larger land focused group like Farm Credit services. I bought 135 acres of mostly rec only ground with 35% down at 4.25%. That rate is fixed for 5 years then there are limits to increases/decreases...more than likely will refinance or pay off by then. You can amortize your payments like it is a 15/20/30 note. I used a local bank and no one else could touch them.

A buddy just bought a 40 acre timber piece and only put 20% down...not sure on his rates or terms.

 

[habitat24]

Check to see what gets the best rates,and what the state rates for taxes are and how this will effect your costs.You may want to spend more to have more ag and in turn more income.After adding another 50 of ag I was able to make 10 months of payments off the soybeans this year.You can't plan on that every year but by having more ag it may lower taxes alot.Be sure and check with ag credit and several banks

 

[Diggdug]

With rates going up, I would suggest going with a long term fixed rate mortgage. Personally I like long loans and low monthly payments. Let the time value of money work in your favor. I just got a 25 year note with FCS for 5.8% but they have a profit sharing check every year so your effective rate is closer to 5%. Not sure what they need for a down payment as I had plenty of equity in my land and didn't need one...

 

[Tim Hull]

I had a house worth 200k. I would put the money saved up down on the house and pay down your mortgage. Then refinance the house and use that money to buy the land. That way you get way better mortgage rate, I got 3% 5 years ago for 15 years and I only put 20% down on the property. Not everybody can do it this way, but cheaper. At the time If I bought the property not remortgaging and financed it separately it was going to be 5% and balloon rate after 5 years.

 

[Daver]

I agree with Tim, if you can finance the land via your house you are going to save $$'s on interest and probably avoid having to come up with a big down payment, etc.

 

[BJohnson]

One other thought, if you do the loan via the house mortgage, there is zero question about the deductibility of the interest on the loan - it's deductible. If you finance directly against the land, the farm may need an "income" in order to deduct the interest on the loan. If the farm is all timber, there will be no annual income stream.

 

[DarkArcher]

Also may depend on how good of a price you are getting on the farm for down pay percentage.

A partner and I purchased a 50 acre parcel this year and worked with a local bank. It is about 8 acres tillable and rest timber. We were able to get 15% down as the loan to value on the farm was good enough that they were comfortable with 15% down. We still had to do a 5 or 7 year balloon payment however. Our local bank is also very good to deal with.

 

[Tim Hull]

I didn't have any problem with my bank in Muscatine at First National Bank doing my loan this way. I borrowed 80k on a 50 acre parcel that I purchased for 105K. I just know I am saving a ton on Interest. But I had a lot of equity in my house. My payment on house and land is under 1k a month.

 

[Diggdug]

Everybody's financial situation is different. I agree that taking the money out of your house is a great idea if you have enough equity. I was unable to do that because of a divorce and not enough equity. My biggest priority is to max out my 401k and in order to do that, low monthly payments and long term fixed rate Mortgages are a must. One thing is for sure, your compounded interest in your retirement fund over the next 20-25 years will definitely out perform your fixed rate mortgage interest costs....

 

[BJohnson]

"One thing is for sure, your compounded interest in your retirement fund over the next 20-25 years will definitely out perform your fixed rate mortgage interest costs...." let's hope so.

The equity markets have been on a very good run overall for the past 7 years - but nothing is guaranteed. That's a big reason why I finally pulled the trigger on some land - diversification of assets.

I went 20 yr fixed through FCS. Already running scenarios regarding prepayment plans to shorten it up to hopefully 15 or less.

BTW - good luck Jacksons on finding that special place......

 

[straightshooter]

My family is starting to get more serious about buying a hunting property and I know the best way to find this out is to go talk to a lender but what are some interest rates and loan amounts/years for recreational ground currently? Is there a set percentage needed for a down payment? Are there any other factors to keep in mind financially when buying a place?

Thanks for the info!

Farm Credit Services in Ottumwa will do a 20 yr fixed and today's rate is around 5.6%. They'll loan up to 70% of the value of the farm you're buying. In other words, you'll need to put down 30%.
Call Matt Vanderlinden 641 682 8789.

 

[sep0667]

I had a house worth 200k. I would put the money saved up down on the house and pay down your mortgage. Then refinance the house and use that money to buy the land. That way you get way better mortgage rate, I got 3% 5 years ago for 15 years and I only put 20% down on the property. Not everybody can do it this way, but cheaper. At the time If I bought the property not remortgaging and financed it separately it was going to be 5% and balloon rate after 5 years.

Looking at buying land is something that I am very interested in and see myself doing in 5-10 years. So how do the refinance with the house thing work? You can take the equity you have in your house and the bank will let you use that as a down payment for land?

 

[Daver]

Looking at buying land is something that I am very interested in and see myself doing in 5-10 years. So how do the refinance with the house thing work? You can take the equity you have in your house and the bank will let you use that as a down payment for land?

Provided you have enough equity in your house you can take a home equity loan(HELOC) and use those proceeds to do whatever you want. Bet it all on red in Las Vegas(not recommended ), take your wife on a cruise...or two(temporary satisfaction ) OR you can apply those funds towards the purchase of some land(Hint, this is the best choice. ). Doing it this way has these advantages...1. No down payment required. 2. Usually the lowest interest rates available. 3. Interest is tax deductible.

Now then, there is also some risk to consider too. If for some reason you cannot handle the payments, etc, you could end up with your residence at risk. So consider this approach carefully, but for the most part, this is a pretty good route to consider.

 

[sep0667]

Provided you have enough equity in your house you can take a home equity loan(HELOC) and use those proceeds to do whatever you want. Bet it all on red in Las Vegas(not recommended ), take your wife on a cruise...or two(temporary satisfaction ) OR you can apply those funds towards the purchase of some land(Hint, this is the best choice. ). Doing it this way has these advantages...1. No down payment required. 2. Usually the lowest interest rates available. 3. Interest is tax deductible.

Now then, there is also some risk to consider too. If for some reason you cannot handle the payments, etc, you could end up with your residence at risk. So consider this approach carefully, but for the most part, this is a pretty good route to consider.

Wow, I may be closer to making the dream come true than I realize. I have not looked much into the finances of it. Just been being about as frugile for several years now. I.E. still rocking the flip phone, driving the same vehice for years, rarely eating out, picking many extra shifts at work etc. Still will be several years down the road, but I feel well on the way.

 

[Altiman94]

I understand that re-financing your house and using a HELOC will allow you a better interest rate than getting a loan on the land itself. But, there is risk.

Meaning, if for some reason you lose your income and can no longer make the payments - they will take your house. Part of the housing crisis that we had resulted from people using their houses as a bank. You are better off to finance the house and land separately. I've seen some buy boats, cars, etc on a HELOC and when they cant make the payments, they take the house. I'd rather lose my hunting land than the place where I live.

Contrary to popular belief, the value of houses and land can go down. In fact, the value of farm land in the last 3 years has gone down on average 8% due to the recent farm price survey reports posted yearly.

 

[habitat24]

If anyone buys as partners between a couple of buddies make sure you have everything set up to protect each other.It may be from divorce,or death so life insurance and first right of purchase etc. can prevent alot of court cost.I was lucky on my land I attached it to some rental property so I make 1 payment and the rentals are in the black and pay for everything except taxes

 

[Daver]

I understand that re-financing your house and using a HELOC will allow you a better interest rate than getting a loan on the land itself. But, there is risk.

Meaning, if for some reason you lose your income and can no longer make the payments - they will take your house. Part of the housing crisis that we had resulted from people using their houses as a bank. You are better off to finance the house and land separately. I've seen some buy boats, cars, etc on a HELOC and when they cant make the payments, they take the house. I'd rather lose my hunting land than the place where I live.

Contrary to popular belief, the value of houses and land can go down. In fact, the value of farm land in the last 3 years has gone down on average 8% due to the recent farm price survey reports posted yearly.

While there is risk involved with using a HELOC to fund a land purchase, you could alternatively sell the purchased land if the need arises, etc. In short, even if the need to bail out arises, there are a variety of ways to avoid losing the house.

While farm land has decreased in value, the price of recreational ground is still very strong and even rising in some areas.