Financing Land

[ETF]

Along the lines of the thread about land prices, has anyone found a cheap way to finance land? I'm currently using Farm Credit. They needed 20% down and I'm paying 8.125% on a 20 year note. I talked to a number of banks and they will not provide long-term financing for more than 20 acres. The best they will do is 40% down, and an adjustable rate for 5 years on anything larger than that. Then you've got a ballon payment or get to refinance - no thanks!! Mortgage brokers don't want to touch anything over 10 acres

So, does anyone have a better financing option? I'd love to get some of that 5.625% money you see advertised for home mortgages.

 

[bigbull338]

sounds like the land bank is the best way of financing the loan.the only other way todo it is get the owner to finance it.an thats if your just now buying it.you could go to FHA see if they would finance it.

 

[Brute 23]

ARMs (adjustable rate mortgages) are ok if they have a cap on them.

It all depends on how good your cedit is, who you regularly do banking business with as to what kind of loan you get.

I don't know a specific loan if that is what you are looking for, sorry.

FHA does not give loans, they insure them.

 

[MShaffer]

We ran into the same situation, our bank could not finance 60 acres. Our banker suggested splitting the property with into 2 deeds. He could then finance the smaller section with the house and buildings. The way our property laid, we could not split it and get the house on a small enough lot.

We ended up at Farm Credit paying 1/2 % higher then our bank. This was almost two years ago.

Mike

 

[Auburn_Ag]

Along the lines of the thread about land prices, has anyone found a cheap way to finance land? I'm currently using Farm Credit. They needed 20% down and I'm paying 8.125% on a 20 year note. I talked to a number of banks and they will not provide long-term financing for more than 20 acres. The best they will do is 40% down, and an adjustable rate for 5 years on anything larger than that. Then you've got a ballon payment or get to refinance - no thanks!! Mortgage brokers don't want to touch anything over 10 acres

So, does anyone have a better financing option? I'd love to get some of that 5.625% money you see advertised for home mortgages.

Are you getting a loan with them or you already have a loan with them?

Have you talke to your bank (Farm Credit) about current interst rates lately? If you have not talked to them, you might check in on coverting you loan to a cheeper interst rate. Long term fixed rates are the cheepest they have been in years.

 

[Brute 23]

Along the lines of the thread about land prices, has anyone found a cheap way to finance land? I'm currently using Farm Credit. They needed 20% down and I'm paying 8.125% on a 20 year note. I talked to a number of banks and they will not provide long-term financing for more than 20 acres. The best they will do is 40% down, and an adjustable rate for 5 years on anything larger than that. Then you've got a ballon payment or get to refinance - no thanks!! Mortgage brokers don't want to touch anything over 10 acres

So, does anyone have a better financing option? I'd love to get some of that 5.625% money you see advertised for home mortgages.

Are you getting a loan with them or you already have a loan with them?

Have you talke to your bank (Farm Credit) about current interst rates lately? If you have not talked to them, you might check in on coverting you loan to a cheeper interst rate. Long term fixed rates are the cheepest they have been in years.

The loan rate is like 3.75 or some thing like that now. YOu will not get it that low but 8.125 still seems kind of high.

 

[TexasBred]

If you find someone to finance your land hopefully it will be a fixed rate loan. Absolutely nothing wrong with an adjustable rate loan other than right the chances of it going down are slim to none. All it can do is go up. If you sign one check on the index they tie the interest rate to and how much it can be adjusted up or down at any one time. Also insist it have a cap which limits the maximum rate. So many of these low interest rate loans have high closing cost and you'll have to pay one or two points at closing which can add up to big money. Often cheaper in the long haul to pay a 1/4% to 1/2% more than pay the "prepaid interest" unless you're just looking for a tax deduction.

 

[ETF]

I've had the loan with Farm Credit for about 2 years. Got one small rate reduction shortly after the loan started. I check with them every 6 months or so. Apparently they tie their loan rates to bonds, and bonds are still high. That's what is so frustrating about seeing these low mortgage rates.

I talked to one bank last week just to see what they had available. Same old story, 5 year loan, adjustable rate, and the going rate was 8% with a 12% cap. Thanks but no thanks. I can't imagine how any young folks could get started if they don't already have the land.

 

[Mahoney Pursley Ranch]

To get the low Mortage interest rates I was told when I checked around the land had to be 10 acres or less and had to have a home on it already or sign an agreement to build in a specified period of time. You won't get the lowest rates on raw land over 10 acres in Texas.

 

[twabscs]

Farm land is "commercial" so it's always a bit higher on rates. I bought 320 acres last month using Farm Credit and paid 6.50% for a 15-year-fixed note. A 10 year note would have been a little less, a 20-year, a little more. With FCS you can "refinance" for $200 after the first year so I would call them about that 8% rate and get it reduced.

Oh, and you're right about banks have trouble loaning right now, or so it seems. When I bought my first farm back in 2005, I got a great rate 5.75%, but it was only fixed for 5-years. Banks don't do "fixed" notes on Farm land, at least not around here. I went back to get financing for the recent purchase above and they wanted 30% down and offered a 7.25% rate. I'm really glad I found Farm Credit, they are much easier to work with and provided the best rates compared to all the banks I spoke with. Just FYI.

 

[stocky]

I will echo what has already been said about Farm Credit (now FCS financial) being the way to go. The rates are lower now so you may want to refinance with them. You are allowed to do that once per year. I was on the phone with them again today and I am still holding off pulling the trigger, thinking that rates will get a littlle lower and then I will do it. After the bad experiences with so many bank buyouts, I switched to FCS about 7 years ago and I have been extremely happy. I have purchased parcels of land 4 times after I originally took my land loans to them. There has never been any problem and they have been extremely good to work with. Last year was the first year they paid dividends and today I got another dividend check. After my buddy at my local bank retires, I will move my cattle lines of credit to them, also.

 

[Brute 23]

Although it may not be the best in this situation,,, don't be scared of ARMs. Just know the cap... best case,,, worst case.

 

[ETF]

Thanks for all of the input. Obviously Farm Credit here in Florida has some different policies than in other places. Very nice folks, but it's really frustrating to watch 30 year fixed home mortgages drop below 6% while mine remains over 8%. Another source of frustration has been that I can't get a clear answer on what bond funds, indices, etc. they use to calculate the going rate (so I can watch it and calculate the rate myself). For what it's worth, here's the answer from the senior person at the local Farm Credit:

There is no specific index you can track. What I do is watch the 10 year bond. It has gone down some, but according to our parent bank, the market is to the point where they will not buy the bonds at these low yields, so it looks like in order to fund long term, bond yields are going to go up which will drive up long term rates. We basically are in a freeze right now on changing rates due to this.

Sounds like if you are able to refinance lower, or at least lock in a decent rate, you better do it now.

 

[TexasBred]

ETF if it's a fixed rate your looking at the folks your talking with don't have to tie the rate to anything. The board simply sets the rate. If it's an ARM they know darn well what they intend to tie it to but may not know what YOUR rate will be until you get closer to closing. Folks I've dealt with in the past would quote me a rate they intended to stick with BUT if the index and their rate went down before we closed they would go down on my rate. May be different now with all the problems in real estate lending.

 

[GMN]

I've had the loan with Farm Credit for about 2 years. Got one small rate reduction shortly after the loan started. I check with them every 6 months or so. Apparently they tie their loan rates to bonds, and bonds are still high. That's what is so frustrating about seeing these low mortgage rates.

I talked to one bank last week just to see what they had available. Same old story, 5 year loan, adjustable rate, and the going rate was 8% with a 12% cap. Thanks but no thanks. I can't imagine how any young folks could get started if they don't already have the land.

You should check around other banks, most around here do 15 year adjusted rates with caps. To me paying the farm off in 15 years is much better than 20 or 30 years. I personally do not like Farm Credit, they are strictly number people, set rules for everyone.

GMN

 

[TexasBred]

I've had the loan with Farm Credit for about 2 years. Got one small rate reduction shortly after the loan started. I check with them every 6 months or so. Apparently they tie their loan rates to bonds, and bonds are still high. That's what is so frustrating about seeing these low mortgage rates.

I talked to one bank last week just to see what they had available. Same old story, 5 year loan, adjustable rate, and the going rate was 8% with a 12% cap. Thanks but no thanks. I can't imagine how any young folks could get started if they don't already have the land.

You should check around other banks, most around here do 15 year adjusted rates with caps. To me paying the farm off in 15 years is much better than 20 or 30 years. I personally do not like Farm Credit, they are strictly number people, set rules for everyone.

GMN

Good advice :clap: ....if you bother to check it out you'll find that the payment for a 15 year amortization is NOT that much larger than a 20 year...or even a 25 for that matter.

 

[I luv herfrds]

We are with Farm Credit for our farm loan. We took that out around 8 years ago. ARM's were down to 3.6%, but having seen people lose their places thanks to them we went fixed and got a 5.48%.
What I like about Farm Credit is we have a future payment account and in about 3 years we should have enough to pay off the final amount and be completely debt free. :banana:

Something that was done years ago was a rent to own agreement. You would write up an agreement to rent the land and pay so much for it including interest. Most that I had seen were set at 5%.

 

[TheBullLady]

Land loans are always at least 1 1/2 percent higher than a home or residential loan. They are still considered commercial, probably because the lenders are assuming you're producing something with a farm or ranch. Here in Texas either Capital Farm Credit or the Texas Land Bank are the two main lenders. They are doing fixed notes up to 40 years at about 6 1/2 right now. Of course that's 20% down and excellent credit.