Interested in buying land in Florida for a commercial or residential construction project? If so, one of the questions you will need to answer early on is, “How will I finance my land purchase?”
There are a number of options for financing land purchases. Let’s take a look at the pros and cons of each of them now.
Options to Finance a Land Purchase
- Cash. If you have extensive liquid finances at your disposal, you might be able to afford to purchase the land you are interested in outright using cash. If you are in a rush to move on a valuable vacant lot before a competing buyer, offering to pay in full upfront can often be enough to close the deal in time. After all, you do not need to borrow money. The seller receives full payment immediately and there is no lender involved to take on risk. Additionally, you have the peace of mind of knowing the land is completely paid off, and you will not need to worry about paying interest or fees. There are, of course, quite a few drawbacks to a cash purchase of land. For one thing, a lot of individuals and businesses simply cannot afford this kind of big upfront expense. And even if you can, your options will be constrained by the cash you have to spend. Plus, after you do spend that money, your finances will lose a lot of their liquidity. That means you will have less money available to fund construction of a new property or other private or commercial expenses.
- Owner Financing. It is common these days for sellers to offer financing directly to land buyers. As with other methods of purchasing land, this one has its benefits and drawbacks. What is good about owner financing is that it is flexible. You can often make a low down payment, and you may be able to move forward with a purchase even if you have poor credit. But there are significant downsides as well. Not surprisingly, the interest rate you will pay with this type of financing tends to be pretty high. Additionally, the seller of the land is not actually a bank, credit union, or other type of regulated lender. As such, you are taking on a much higher degree of risk borrowing from a private individual. Additionally, foreclosures can happen rapidly and with poor communication (if any) from the seller. Finally, the biggest risk of all is that you might pay off the loan in full, only to find that the owner wants to cheat you and keep the land. You could run into such a problem with heirs as well should the owner pass.
- Start With a Lease. Another way to finance a land purchase is by leasing initially, a kind of “rent to own” scenario. This is a fast way to build equity, and involves a low down payment. It also gives you a chance to evaluate the land and really decide if you want to own it. But it is an expensive option, and the risks listed for owner financing are all applicable for leasing with an option to buy as well.
- Loan Through a Big Box Lender. Your next option is to buy land by taking out a loan through a big-box lender. The benefit of going this route is that you are dealing with a regulated entity. That means that you have protection as a borrower that you would not have if you were borrowing from the owner of the land. The interest rate will probably be lower than what you would pay if you went through the owner, but it could still be high. The closing process may be slow, and the down payment could be high. Additionally, a lot of big box lenders do not specialize in land loans. As such, the process could be a complicated one, and may lack the flexibility you need.
- Loan Through an Independent Mortgage Broker. Finally, one more way to finance a land purchase in Florida is to go through an independent mortgage broker. With a mortgage broker, you have a “best of all worlds” scenario. Unlike a big box lender, an independent mortgage broker will not treat you like a number. This type of mortgage company strives for flexibility, and can adapt to the needs of each borrower. But like a big-box lender, an independent mortgage broker is regulated. That means you are protected throughout the mortgage process. A broker works with a network of lenders. So, they can reach through that network to bring you more competitive down payments, interest rates, and terms than you might find going directly through a big-box lender. Additionally, a broker may work with borrowers who do not have perfect credit, whom the big banks would turn away. Those that specialize in land loans have streamlined, rapid processes in place, letting you close fast on the ideal land for your project.
Buy Land in Florida Now With a Competitive Loan
Lending Bankers Mortgage is an independent broker working with commercial and residential borrowers in the Miami area and throughout the state of Florida. With our network of 130 lenders, we can connect you to the competitive, flexible land loan you need. Ready to take the next steps in turning your dream into a reality? Contact us today at (786) 220-1100 to schedule your consultation.