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A land mortgage is a lot like a normal mortgage loan. The only real difference is the cost and the risk of buying or loaning. Unlike your usual mortgage this has a lot less value and is less attractive to the bankers and brokers. In addition to that the price fluctuation of the land value itself, there is also the matter of the housng market. If the housing market isn't going up, then there is less demand for houses, which means less people are developing and land values go down. Remember, the land by itself is not worth very much, unless it has a lot of potential, and for that to happen it has to be in a great location.
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Most national mortgage brokers and lenders wont do a land mortgage unless you do what is called a balloon mortgage or a short term mortgage. These normally have higher interest rates. This is mainly for two main reasons. Unlike houses, which hold their value over time, land is really nothing special until it is developed. In addition to that, there isn't a whole lot to gain and there isn't as much reason the bank would want to own the land if you were unable to pay the loan. For these reasons, you will not likely get a great deal.
If You Want a Land Mortgage
If you want a land mortgage you will likely have to work with local banks or local brokers who know the area and who have an office near by and can keep tabs on things. However, you will still have the short term loan. It is unlikely that you can acquire a 30-40 year mortgage on the land.
There are other options if you cannot get a good deal or cannot afford to pay off a short loan or balloon mortgage. The land owners themselves can finance the mortgage. You may still need a broker to draw up the terms, but if the land owner is willing to sell and is no hurry to get the money, it is possible. Unfortunately this only happens in ideal situations. If you cannot get the land owner to finance the deal, you may be able to sweeten the deal for the banks and get a longer loan if you have plans for the plot of land. For instance, if you do plan on doing something with the plot of land besides holding it. Develop the idea a little more, come of with a pretty concrete plan and you may be able to get the bank to give you a land mortgage because in the end they will own something valuable. The best thing for them is to see that you have already figured out the costs, have blueprints for the house and have a general time frame.
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