Three Ways to Finance Your Bare Land Purchase
If you have been searching for just the right parcel of land to build your future home or cabin on, then it is important that you plan for how you will finance the purchase. While you can easily obtain a mortgage for an existing cabin or home, getting a loan for a land purchase is a much harder thing to accomplish because many lenders do not offer this type of financing. The good news is that you have other alternative ways of financing a land purchase, including each of the following:
Ask the Seller to Carry a Loan on the Land
The easiest way to finance your land purchase is to ask the seller to carry a loan on the property. Many sellers are willing to do this because they originally purchased the land as an investment or to build their own home or cabin on it, but their plans never came to fruition. Their plans changed over the years, and now they have an asset they aren't using. Since they likely don't need the money from the sale to purchase a new home for themselves, many sellers are willing to carry a loan for a period of time and earn some extra money from the interest.
Use a Hard Money Lender
If the land's seller is not willing or able to carry a loan on the property for you, then you may need to utilize a loan from a hard money lender. Hard money lenders are similar to banks, but they step in and lend where banks will not. For this type of a loan, you will pay a higher interest rate than you would with seller financing or a traditional mortgage. However, hard money loans are fine if you will be using them for a short period of time or cannot get land financing elsewhere.
Use a Low-Interest Credit Card
Finally, if you have an excellent credit score that affords you the ability to have a high limit on a low-interest rate credit card, then you might want to consider using it to purchase your parcel of land. When compared to using seller financing or a hard money lender, a low-interest rate credit card can be the cheapest way to purchase your land. Additionally, the credit card debt is not secured by the land that you purchase in the same way as your other options. This means that if you have to file bankruptcy in the future, you may not lose the land as you would with a traditional mortgage attached to it.