Land buying question

[RickB]

Little debt? Can I assume that your home is paid off or small mortgage. What about a home equity loan?

That's what we did when we bought vacant land out of state. A home equity line of credit. In my case, interest payments are tax deductible.

 

[two_bit_score]

As anyone bought farmland that does not have a residence on it? There is some farmland that adjoins my property that I am thinking about buying but I am finding out it is very difficult to obtain a mortgage for land. I have very good credit, very little debt, and a decent income but banks don't even ask for any of that, as soon as I tell them what I am looking at they tell me they can't help me. The only option I have found is a farm credit union that is offering 6.5% for 20 years. Anyone else been through this and found a better option?

Lots of good options brought up already.

 

[dodge man]

I've seen the same problem off and on over the years. I'm a land surveyor and I've been hired several times to survey a large tract of ground and break the house out from it. The people always said the bank required it since they wouldn't lend money on the farm ground. I suspect most of the time they were going through a different bank for the farm ground then the house. I also bet the interest rates were different. There are a lot of farmers that borrow money for farm ground around here so I know its done.

 

[wmonroe]

Thanks for the suggestions. I'm looking into whether the mineral rights are included as would be more interested/willing to pay more if so. This land has been in the same family for 50+ years so I would guess the mineral rights are still with it but the real estate agent is pulling the deed to make sure. After talking to the local banks yesterday it seems the farm credit union or home equity loan are my choices. Now I need to talk to my neighbor and find out for sure if he wants to buy 1/3 of the land that adjoins his property, if he does that will put the remaining acres right in the price point I want to be in. If he doesn't want to buy then I need to do some thinking, the entire piece is more than I would like to spend. If it has the mineral rights then I will probably do it but if not I might wait, the whole thing of being financially responsible is no fun. Lol

 

[dmccarty]

When we bought our land, the credit union was useless since we were buying more than 5-10 acres. We ended up with a large southern bank who gave us the loan. The interest rate was a few points higher than house mortgage rates but it has worked out. We are still with the credit union because it is easy for me to access but their service is seriously lacking. If I loose my job, and thus my easy access to the CU, we will move to the so called big bad bank. The bank has given excellent service and rates to use for decades now which is completely different than the CU. We have dealt with many people over the years with the bank and have only had one bad experience with one person. The bank did an awesome job recovering from that one bad person.

Don't be to try other banks or even CU's. Shop around.

Later,
Dan

 

[two_bit_score]

Thanks for the suggestions. I'm looking into whether the mineral rights are included as would be more interested/willing to pay more if so. This land has been in the same family for 50+ years so I would guess the mineral rights are still with it but the real estate agent is pulling the deed to make sure. After talking to the local banks yesterday it seems the farm credit union or home equity loan are my choices. Now I need to talk to my neighbor and find out for sure if he wants to buy 1/3 of the land that adjoins his property, if he does that will put the remaining acres right in the price point I want to be in. If he doesn't want to buy then I need to do some thinking, the entire piece is more than I would like to spend. If it has the mineral rights then I will probably do it but if not I might wait, the whole thing of being financially responsible is no fun. Lol

We bought a tract of land and ran into the same issues with our bank. They wanted insurance on the tumbledown house, all kinds of fees, etc. So we put up some CD's and just bought it in fee simple. Little more than a year later we got more from a lease in one year than we paid for the whole place.

 

[wmonroe]

Another option might be to take a loan from my retirement accounts but I'm not sure that is a good idea and I need to look and see if I have enough money in their to pay for the land. Being 31 I haven't been investing for retirement for too long yet.

 

[sodamo]

Another option might be to take a loan from my retirement accounts but I'm not sure that is a good idea and I need to look and see if I have enough money in their to pay for the land. Being 31 I haven't been investing for retirement for too long yet.

Likely not the best choice.

David Sent from my iPad Air using TractorByNet

 

[wmonroe]

Likely not the best choice. David Sent from my iPad Air using TractorByNet

I was mostly joking about the retirement account, it has been making a pretty decent return lately so taking money out will hurt my planned retirement timeframe.

 

[Cat_Driver]

Don't forget the Small Business loan. That's what I did, I financed the land, a 100'x125' metal buildingn, NO home. I only wanted a 15 year loan, my credit was great, financing was cheap, and I just made the last payment lat month.

 

[MossRoad]

Another option might be to take a loan from my retirement accounts but I'm not sure that is a good idea and I need to look and see if I have enough money in their to pay for the land. Being 31 I haven't been investing for retirement for too long yet.

My opinion on borrowing from a retirement account at such a young age is don't do it. I wasn't able to start my 401k until I was 28. Had I been in it from 21 I could retire much earlier than my current course(or keep working at my choosing). If you borrow from your retirement accounts, you'll still have to pay it back. And the money you pay back could have been used to build it up, etc... Find some good literature on the pros and cons of borrowing from an investment account and run the numbers to see how much you may be short changing yourself when you get to retirement age.

 

[MossRoad]

I was mostly joking about the retirement account, it has been making a pretty decent return lately so taking money out will hurt my planned retirement timeframe.

Good decision. :thumbsup:

 

[wmonroe]

Don't forget the Small Business loan. That's what I did, I financed the land, a 100'x125' metal buildingn, NO home. I only wanted a 15 year loan, my credit was great, financing was cheap, and I just made the last payment lat month.

That sounds very intriguing. I'm not familiar with small business loans so this might be a dumb question, but since I don't have a business would I even qualify?

 

[wmonroe]

My opinion on borrowing from a retirement account at such a young age is don't do it. I wasn't able to start my 401k until I was 28. Had I been in it from 21 I could retire much earlier than my current course(or keep working at my choosing). If you borrow from your retirement accounts, you'll still have to pay it back. And the money you pay back could have been used to build it up, etc... Find some good literature on the pros and cons of borrowing from an investment account and run the numbers to see how much you may be short changing yourself when you get to retirement age.

Good decision. :thumbsup:

Thanks, we have been working hard to build a retirement since I was about 24 so I don't want to mess that up.

 

[drssg]

When we bought land, the regular banks weren't interested. But when we built a house, they were OK with financing the land and house together.

It might be worth checking whether you can refinance everything to include the extra land.

 

[MossRoad]

Thanks, we have been working hard to build a retirement since I was about 24 so I don't want to mess that up.

Seems like yesterday I was 24, agonizing with my soon to be wife over the purchase of our first house. We had to borrow a huge sum of money..... $18,000!!! Man, that mortgage payment with taxes was going to be $256.00 per month! How were we going to make it? :laughing: Anyhow, good planning, double mortgage payments, good investments, modest income, children that we wanted before we tried to make them.... 30 years later life is pretty good! It sounds like you have a good plan. Best of luck to you! :thumbsup:

 

[DKCDKC]

Farm Credit got us the financing... Inherited a farm & wanted to build on it. Worked out beautifully. Apparently the problem is that banks cannot sell mortgages on land, or farms, etc. However recent conversations with bankers reveals that two local banks have moved to make such loans. They don't sell their mortgages and want to get some business away from Farm Credit. Check out any locally owned banks around where you live.

 

[sfloggie]

Dave,
In 2005 we brought 80 acres in Arcadia, OK through Farm Credit. Very nice, easy process. We had it surveyed and then ran into Adverse Possession by a neighbor (but another story). Also I had never heard of release of mineral rights as we are from the East Coast. None of the mineral rights conveyed and we found the there was a "blanket easement" from the early 1940s that allowed a gas and oil company to enter anywhere. But we thought the odds were on our side.

A few months later we were looking for a Construction home loan and went to Chase Manhattan as I had used them in VA. Chase would only finance the house and five acres of which this included 2500 road 18' wide. Farm Credit agreed to release the five acres from the land load so we had to do another survey for the five acres. This part was not nice and easy.

We sold the entire place a year later due to the Adverse Possession from one neighbor and repeated destruction of a creek bank by another. Now we are back in VA with 112 acres we purchased through Farm Credit and Happpy, happy, happy. They also finance a home. Paid more in interest, but nice process and good people.

 

[wmonroe]

When we bought land, the regular banks weren't interested. But when we built a house, they were OK with financing the land and house together. It might be worth checking whether you can refinance everything to include the extra land.

We have found one bank so far will to refinance so that is a good option. Thanks

Farm Credit got us the financing... Inherited a farm & wanted to build on it. Worked out beautifully. Apparently the problem is that banks cannot sell mortgages on land, or farms, etc. However recent conversations with bankers reveals that two local banks have moved to make such loans. They don't sell their mortgages and want to get some business away from Farm Credit. Check out any locally owned banks around where you live.

Dave, In 2005 we brought 80 acres in Arcadia, OK through Farm Credit. Very nice, easy process. We had it surveyed and then ran into Adverse Possession by a neighbor (but another story). Also I had never heard of release of mineral rights as we are from the East Coast. None of the mineral rights conveyed and we found the there was a "blanket easement" from the early 1940s that allowed a gas and oil company to enter anywhere. But we thought the odds were on our side. A few months later we were looking for a Construction home loan and went to Chase Manhattan as I had used them in VA. Chase would only finance the house and five acres of which this included 2500 road 18' wide. Farm Credit agreed to release the five acres from the land load so we had to do another survey for the five acres. This part was not nice and easy. We sold the entire place a year later due to the Adverse Possession from one neighbor and repeated destruction of a creek bank by another. Now we are back in VA with 112 acres we purchased through Farm Credit and Happpy, happy, happy. They also finance a home. Paid more in interest, but nice process and good people.

Thanks, it does look like the farm credit union is the best option.

 

[wmonroe]

Seems like yesterday I was 24, agonizing with my soon to be wife over the purchase of our first house. We had to borrow a huge sum of money..... $18,000!!! Man, that mortgage payment with taxes was going to be $256.00 per month! How were we going to make it? :laughing: Anyhow, good planning, double mortgage payments, good investments, modest income, children that we wanted before we tried to make them.... 30 years later life is pretty good! It sounds like you have a good plan. Best of luck to you! :thumbsup:

Thanks, I truly appreciate it.