Can you mortgage a lot before putting a house on it?

[vi edit]

Found a lot that *at least on paper* looks good. 2.6 acres, city water, electric, natural gas, cable. Decent school district. Nestled into the river bluffs along one of the longest contiguous stretches of forest in IL. Price is decent too. My Dad is going to check it out later this week and take some pics for my wife & I. Plus check and see if it's possible to put a decent sized house on it.

My real question is though, can you mortage lots? I'd be paying in cash about 1/3 of the lot and would probably have the rest paid off in a year or two when we are looking to actually start building. And then when we do start building, just roll the balance into the construction loan?

 

[EatSpam]

Originally posted by: vi_edit
Found a lot that *at least on paper* looks good. 2.6 acres, city water, electric, natural gas, cable. Decent school district. Nestled into the river bluffs along one of the longest contiguous stretches of forest in IL. Price is decent too. My Dad is going to check it out later this week and take some pics for my wife & I. Plus check and see if it's possible to put a decent sized house on it.

My real question is though, can you mortage lots? I'd be paying in cash about 1/3 of the lot and would probably have the rest paid off in a year or two when we are looking to actually start building. And then when we do start building, just roll the balance into the construction loan?

I don't see why not.... you'd probably refinance once you started building. Call your bank's mortgage people - I'm sure they'd be happy to work with you.

 

[vi edit]

I don't see why not.... you'd probably refinance once you started building. Call your bank's mortgage people - I'm sure they'd be happy to work with you.

Normally I would, but it's Sunday, I'm bored, and thought someone else on the board would have done something similar.

 

[Squisher]

There are banks that will give loans for vacant land, but they are few and far between. You'll probably have to call around. National City does btw.

 

[Muadib]

Yes you can. I was going to buy one in NC, but the deal fell through. I was pre approved for a mortgage.

 

[BlackOmen]

Look for a construction loan from your bank. I had a construction loan in the past and it was pretty much like a line of credit. They would dispurse money to the appropriate contractors and you would only owe payments if money had actually been dispursed. IIRC, it was similar to a 5/1 ARM.

 

[GuitarDaddy]

Most banks will only loan 50% max on unimproved land. And the ones who will loan more require a hefty down payment

 

[vi edit]

Originally posted by: GuitarDaddy
Most banks will only loan 50% max on unimproved land. And the ones who will loan more require a hefty down payment

Hrmmm....

Good to know. I can probably scrounge up another 20% of downpayment.

 

[rahvin]

You want a construction loan. The rates and fees make babies cry but you only hold them for a short time while you build, after which you take a real mortage and pay off the construction loan.

 

[vi edit]

Originally posted by: rahvin
You want a construction loan. The rates and fees make babies cry but you only hold them for a short time while you build, after which you take a real mortage and pay off the construction loan.

Problem is that I probably wouldn't actually break ground for a year. Contruction loans have a certain duration that they exist for. I'd assume that I would be too far away from building to get approved for one. No?

 

[Wizkid]

Can you get a HELOC secured with your current house?

 

[QED]

In short, yes.

The bank I used to work for offered lot loans.

Typically, you need at least 30 to 40% down payment.