How Best To Use Your Vacant Land As Collateral for A LoanFast Action Finance SEO
When you have a land that is just lying around, you have money that is not yet liquefied. You could have tons of uses for it but you might have no idea of how to use the land to get some cash and still get to keep it. In this case, you can use your vacant land to secure an equity loan. Compared to home equity loan, land equity loan cannot be accessed easily. It has its individual exceptional challenges.
• Get the services on an appraiser
You cannot use your vacant land as collateral if you have no idea of its current worth. Knowing its value is the only way you will get to know the much a bank can lend you. If, for instance, you have been in possession of the property for years, there is a very high chance that its value has appreciated. Therefore, it is advisable to seek the services of an appraiser so that he/she can help you out with the land’s current market value. You can always find contact details of local appraisers from American Society of Appraisers (ASA) website.
• A title search for the loan
For the underwriting process, the lending institution will require a title search. It would be a good idea if you had one prepared before the underwriting process. For this, you can use a title company to help you with the research or you can simply do it yourself by going to the county’s records office. The charges for these searches differ by location.
• Getting the right lender
Some lenders are hesitant when it comes to using land that is not in use as collateral for access of an equity loan. This is because if the owner of the land finds no use for it other than placing it as collateral, the lender might see it as an easy way for the borrower to walk away or to simply not pay off his loan.
Therefore, before going to a money lending company, first carry out a thorough research on the different money lending institutions out there and contact them to know if they are capable of giving you this type of a loan. In case you own a home as well, this could be an added advantage for you. Putting up your home equity as collateral will work in your favor with the lender.
• Full possession of the land
Before placing your land as collateral, the lender must be assured that you own the land 100% unless you want the money borrowed to be reduced. Therefore, make sure that you are not still clearing arrears on money borrowed before using that same land. Any balance that has not yet been cleared will definitely affect the amount of money the bank or any lending institution might be willing to lend you. In most cases, this balance will interfere with the transaction in that the equity loan you want on the property is not at all cost effective especially for the lending institution.
• Look out for the numbers
Usually, a bank will lend you eighty percent of the value of your property. This amount at times varies and will mostly go higher. However, if you are dealing with a vacant land, then this percentage might go lower. Most banks will not give you over thirty-five percent of the value of your land. Moreover, the interest rate might shoot up for the sake of any additional risks. This interest will be the one to act as compensation. Apart from that, the lender might require an upfront fee making the cost of your loan go higher.
As much as borrowing against vacant land comes with a higher interest, this is also dependent on the location of your land. If for instance you want to borrow against a vacant land within the city, chances are that most bankers will be in competition to see who woos you with their low interest rates. However, if your land is located somewhere remote where infrastructure, road especially, cannot be easily accessed, you will be the one trying your level best to win the banks.
• Winding up the process
Collateral loans in Brampton take quite a process before you can secure the intended amount. However, once that is done, all that is left is to close the deal. The lender’s name will appear as the mortgage holder to ensure that the land is not sold before the full loan repayment. As the borrower, the loan proceeds will either be received as a cheque or a line of credits. This line of credit maybe used to request advances or write cheques against. With this, you simply pay interest using the current loan balance and not the full amount entitled to a line of credit.