It makes a huge difference whether your land loan request is a purchase money request or a refinance. For example, if an experienced developer is buying the land for his next project, there are banks and hard money land lenders on C-Loans who will finance up to 60% of the purchase price of the land.
The thinking behind such a high-leveraged land loan is that (1) the value of the land has been established in the open market as opposed to by a highly-questionable appraisal; (2) the developer is putting cold, hard cash down (only a tiny second mortgage would be allowed in this scenario); (3) the development of the land will serve as the exit strategy for the lender; and (4) experienced developer will be adding value by either improving the zoning or by adding horizontal improvements (bringing utilities to the site, installing streets, gutters, etc.).
On the other hand, if the land loan is a refinance, land lenders will typically underwrite the deal much more conservatively. Loan-to-value ratios on land loan refinances typically are limited to just 20% to 45% LTV.
If the proceeds of the land loan, however, will be used to add value to the land, then the typical land lender can often be much more aggressive. Suppose you own a $1 million piece of land and you want to borrow $700,000 against it to bring utilities to the site, the land lender will probably use the improved value of the land in his loan-to-value calculation.
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But the deal that is tough is the guy who pays $200,000 for a piece of land and through mere luck watches his land increase in value to $500,000. If he wants to pull out more than $150,000 to pay off his credit cards and personal debts, and he personally has done little to increase the property’s value (he didn’t help get the property up-zoned, for example), he will find great resistance from most land lenders today.
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