Owning a piece of land without a developed structure on it can be a smart financial move. Building on the property in the future may lead to your dream home or keeping it in the family to pass down from generation to generation may create your legacy.
While owning bare land is an open book for most, it is, at its core, an unused asset. Most landowners have a difficult time tapping into the equity built up in the property over time, especially when there is no intention to build on the land in the immediate term.
Land creates a challenge when contemplating using it as collateral for equity financing because most lenders view raw land as an incredible risk. Because landowners do not live on the property, it is far easier to walk away and fail to repay an equity loan on the land. It is also typically harder to sell land, especially for rural properties. This leaves lenders exposed to a level of risk not found with home equity financing deals.
However, if you’re considering taking out a land equity loan to buy another piece of land, consolidate debt, build a new home, buy a mobile, manufactured, or modular home, or make another investment, there are lenders who will give you the time of day.
Here is what you need to know about obtaining vacant land equity financing first.
It is Best to Own the Vacant Land Outright
You may be able to find a traditional bank or credit union willing to offer an equity loan or line of credit on vacant land, but there is also a handful of online lenders and brokers who specialize in this type of financing.
Regardless of the route you choose, most lenders are more apt to offer a land equity loan to individuals who own their large piece of land or small lot outright. With no other debt tied to the land, lenders see the property as a lower risk than if there is an outstanding mortgage or lien against it.
If you do have a mortgage on the land you plan to use as collateral for an equity loan, you may not have as much access to the equity in your land due to the inherent risk of land ownership.
How Much Funding Is Vacant Land Eligible For?
For traditional home equity loans and home equity lines of credit (HELOC), lenders typically offer to finance for a relatively high loan-to-value (LTV) percentage – the amount left on the first mortgage compared to the market value of the home. However because there is no structure developed on vacant land, lenders are less likely to lend 80% or 90% of the value of the land.
Instead, most land lenders cap equity loans for vacant land at 35% of the property’s value. In some cases, you may be able to acquire a land equity loan for a higher portion of equity, but you will likely face higher interest rates and additional closing costs as a result.
Lenders use these tactics to reduce the overall risk of the land equity loan.
Alternative Lending Options for Vacant Landowners
1. Refinance Your Vacant Land Loan
Because obtaining a land equity loan can prove to be difficult, especially for those who don’t own the land outright, you may be better off refinancing your current land loan and taking cash out. You can get a cash-out refinance loan on the land even if you don’t currently have a loan on the property.
We recommend you start by speaking to your current lender or preferred bank if you don’t have a mortgage on the property, to explore all of your options with them.
2. Obtain a Personal Loan
Upgrade offers personal loans from $1,000 to $50,000 that can be used for home improvement, debt consolidation, a major purchase, or something else.
If you have an excellent credit score over 720 it may be quicker to apply for a personal loan of up to $50,000 from another trusted lender such as Axos Bank.
If your credit score is lower, you can apply through a company such as Upstart, which uses more than just your credit score for approval. Checking your rate with Upstart will not affect your credit score. The Upstart platform can assist people with excellent, good, fair, poor, and even bad credit scores.
Final Thoughts on Land Equity Loans for Vacant Land
Owning land is a smart way to invest in your future but tapping into equity accumulated in undeveloped or vacant land can present a few challenges. Start by understanding what your borrowing options are with various lenders and know that you may be required to own your land outright before an equity loan or line of credit is made available.
It is also important to understand that land equity loans are rarely offered to borrowers for more than 35% of the available equity in the land, so take the time to plan accordingly, and consider a cash-out refinance loan or a personal loan instead.
Hey Albert, have you contacted any of the aforementioned companies?
I would like a land equity loan on property in Whitmire, SC. Any information regarding this would be greatly appreciated.
Hi Carl,
It will be extremely hard to get any type of loan with a poor credit score. When you say no one can find your credit score, who are you referring to? Have you spoken to any lenders thus far? Can you get obtain your credit score through a free site such as Credit Karma or Credit Sesame?
Got a 1/4 ACRE with a home that needs major remodeling in orange county FL.
Who do I get a land equity loan from?
Need 30000 for remodeling m..asis 120000..
After remodeling 190000+.
No one can even find my credit score.
I’m sure it’s very poor.
I own a large property and home with a parcel of 44 acres outside of the city limits of Batesville Arkansas. It’s undeveloped land owned free and clear with utilities and county road frontage adjacent to one side of the property. This land is at an elevation that offers a beautiful view, however I do not wish to sell it as it has been in my family for many generations.
Recently, I have had a family emergency that has caused me to get behind on my car payment and as I am also in need of financing for a near future roofing project on my home, as well as driveway maintenance and repair, I am looking for a land equity line of credit of roughly 30,000 that I can pay back at a 7-10 year term.
Besides the above mentioned car I don’t have any other debt, and am self employed with a steady income.
My credit is questionable with divorces in my past, along with a repo durring that time, but in the past ten years I have had very few costs that were not within my daily means to cover, I am hoping someone can assist me in finding a lender that could aid me in finding a lender to assist me.
Hi Robert, have you spoken to any banks or credit unions yet?
I’m looking for 100K to 200K based on land Value but not the house on it; I own it free and clear. It’s located in Miami (Wynwood Art District), Florida. The Land is valued at about 1M, in addition, the house is valued at 350K (replacement). I paid 270K cash 5 years ago for the property and put about 200K cash into improvements. I have good credit and good income (tax returns). I want to get an equity loan based on the land because:
1. There’s around 1M in land equity.
2. For a loan based on the house some lenders “require” wind insurance at around $13,000 a year. 3. Paying for wind insurance is not sensible because the house is at low risk of being damaged by a hurricane because of its condition, construction type, elevation, and location.
I want a loan to finish the house with a 6-foot privacy fence on the front, a new rubber roof with solar panels, and to build a 14 X 27-foot room on the back. I was going to do this with cash but because of Covid, I don’t want to use cash. The house itself is in very good upgraded condition, with a good/perfect 4-point inspection. I just want to finish my project as this is my full-time home. Please give me any suggestions you may have. Please feel free to email or call, text me at: removed for your security.
Thanks, Robert
I have property in Florida that nothing is owed on I need a loan to pay off some debt to get my credit better. The property is currently being demoed due to Hurricane Michael so it will eventually be vacant land. The home that is on the property is unlivable due to storm damage.
I’m in need of a loan on land property. I have some bills I’d like to pay of and do some home improvement..
The house burned down about 4 years ago and I can’t afford to rebuild on the property. I don’t have a mortgage on the property. The property is located in Birmingham AL
Hi Fred, have you contacted any lenders thus far?
I have approx 22 acres in Greenbrier County WV. My house burned last year. Property is 90 percent tillable farm land with barn, well and septic. City water in front of property. My credit is bad due to losing my home to fire and a divorce a few years ago. I owe zero on property appraisal should be a little over 100k. I need to borrow around 35,000 against land. I may be able to obtain a co-signer with better credit. Any help would be greatly appreciated.
Hi James, I’m sorry to hear that.
21st Mortgage, Credit Human, and Triad Financial Services are a few companies that specialize in mobile home lending and manufactured home equity and refinance loans. They may be able to assist you. If not, be sure to ask them for a referral.
You can also see if LendingTree can match you with a lender.
Hi Pat,
I don’t see why not. Have you tried contacting your favorite bank or credit union? If they can’t help you be sure to ask for some referrals. Otherwise, Have you thought about getting a personal loan or just putting it on a credit card. That’s a pretty low amount and it might save you a lot of hassle.
Hi Danny, we do not provide loans. Have you tried contacting your bank? You will want to speak with a couple of lenders to get the best understanding of your options. If a lender cannot help you with property loans be sure to ask for some referrals.
I bought a piece of property 13 years ago for 200,000 I’ve never missed a payment and still currently making payments but the land is only worth $25,000 I would like to walk away I need to know my options the property is in North Carolina
I have property that I own free and clear in Tujunga, CA (los angeles county) which I purchased in the 90’s for 12K at a auction. People are building homes 500K plus there however; I need funds to clear the land (hillside property). I need a 2K loan. Is it possible?
My wife and I own 19.11 acres in Hillsdale county Michigan free and clear , we had new pole barn built in summer 2017 with full bath with on demand hot water system along with new 2500 gal. Septic system , new electric . Etc etc etc . Our intent was to build our retirement home there but life happened and we have decided to try and get a loan using the land as collateral , credit scores are bit lo due to disability cases that took time to resolve ! Been turned down by our financial institution . Any help in this matter would be appreciated
I bought our home in Dec. 2016. In august 2017, I bought the 2 lots connected to our home property, next door so that homes couldn’t be built pretty much on top of our home. The lots are paid in full but I am looking for a land equity loan to consolidate some debt and perform some upgrades to our current home. Our town although small in a rural area only has main stream big known banks. I am only looking for $15,000 equity loan to get me where I need to be. Is there any options at all for me in this case? I surely will not let my land go for such a small amount and claiming bankruptcy for that amount is absurd. Can you please point me in the right direction? Thank you ever so kindly.
I have 16 acres of land in Tennessee. Purchase price was 85,000. Still owe 40,000 is it possible to get a equity line of credit on the 45,000?
Hi Kelly, it’s tough to say for sure. The best thing to do is contact a lender.
Is it possible to get a $6,000.00 land loan against the following:
I have vacant land with a value of $16,000.00 located in Marion County Florida. It has 3 years of property tax liens filed against it.
Is a loan possible?
Kelly Phillips
Hi,
I own land free and clear. I would like to get a loan to develop the land and can’t get a construction loan. I need tons of dirt and need cash to pay local haulers to bring in fill at a discount. This will take time to fill the land as I get fill from different projects. I would like to start building in 2 years.
Thank you
Have you talked to any lenders about getting a land equity loan yet?
I own a lot free in Indiana (Acreage=0.119, frontage=40′, depth=130′) which is free and clear. I live in California and am looking to get an land equity loan to purchase a mobile home.
Please advise me of the necessary steps that are needed.
Thank You
Hi Elizabeth, It seems like you should be able to get line of credit up to roughly 35% of the value.
Hello. I purchased 40 acres for 132k @ 7% interest, and paid it off recently after 13 yrs. I just had electricity put in along the periphery of the property, am paying to trench a shared well with a neighbor, and phone lines are underground also at the edge of the property. It is in a development that is equine oriented, and no property can be less than 40 acres. It is totally private with a permanent easement and is completely fenced. I’d like to get a line of credit against it. Does this seem possible? Thank you!
Hi Billy, The best thing to do is speak with a few different lenders to understand what’s available for your particular situation.
I purchased 6 acres and have cleaned it off to build a home in the next couple years,but I have some loans that I would like to consolidate using my land to get lower interest rate. What are my options.
Hi Theresa, please call (855) 407-7835 to discuss your options.
I have a property with 100% equity in it. I am in NEED of emergency funds of 10k or less. There IS a single family 1200 square foot dwelling on the property, (in which I live). HOWEVER, . . . any loan could only be secured by the land, as the house is in need of repairs, making it uninsurable at present. I ABSOLUTELY NEED to be able to get an emergency lian against this, as it is my ONLY asset with that kind of equity! (OBVIOUSLY, if you could put a loan package together for me, the dwelling comes with)! PLEASE realize that I am completely SERIOUS about this, and due to having no credit, I EXPECT to pay more in the range of personal rates, if someone would PLEASE take this loan! PLEASE contact me with an offer! (And because I have NO intent of defaulting, and allowing anyone to acquire my property for 10k, or less, I, myself, see this as a “no-brainer”, for any lender, . . . ESPECIALLY, when I am fine with a much higher rate of interest!) PLEASE contact me with some sort of offer, and asap, please! Thank you!