California Lot Loan

January 24, 2011 by · Leave a Comment 

We can do a lot loan in California for up to 80% of the purchase price of a vacant lot.  The lot should be less than 10 acres, although slightly larger parcels may be acceptable if in a subdivision of similar parcels, and vacant lots of similar size have sold recently in the area.  No structures are allowed on the parcel, even if having virtually no value, or having no value attributed to them.  This would include partially burnt, partially collapsed or partially torn down structures.  These would create both liability and marketability issues (in the case of default) for the lot loan lender.  Note that it might be possible to close the lot loan with a bid from a contractor to demolish and remove the structure, and an escrow holdback of the funds to do just that immediately after close of escrow.  If the vacant lot has a foundation, this is probably acceptable, particularly if no work was done recently, and it is a slab foundation.  Retaining walls may be allowed as well, depending on the situation.

Refinancing a vacant lot in California is also possible.  We can do 65% to 70% of the current appraised value on a California lot loan refinance.  These are particularly useful if the borrower is not ready to build, but faces a balloon payment on their current lot loan, such as on the many Indymac lot loans that were done.  Lot loans in California are fixed 3 years, and then adjust annually the next 27 years,  so they never have a balloon payment due.

Lot Loan Refinance

January 20, 2011 by · Leave a Comment 

We can do a refinance of a vacant lot on Lot Loan Program #1.  There can be no cashout, so we can only refinance your current balance plus closing costs.  This also means no money for plans, permits or construction on a lot loan refinance, even if you are not walking away with cash.  A cashout refinance of a vacant lot is defined as paying off anything other than your current lien or liens on this lot and closing costs.  If you used an equity line on another property to pay for the lot, or a loan from a relative, you cannot refinance that loan on Lot Loan Program #1.  We may be able to arrange a private money cashout lot loan at higher rates and only to about 40% of value.

We can do a lot loan refinance of your current lot loan up to 65% or 70% of the current appraised value, depending on the loan amount.  Land prices are even more volatile than home prices, so your lot may be worth considerably less than when you bought it.  Appraisals can be difficult because of bank owned parcels selling well below previous sale prices, lack of sales altogether, and a lack a vacant lots in mature urban areas.  Nonetheless, if you are facing a balloon payment such as on an old Indymac lot loan, don’t wait until the last minute.  If your balloon note is due, lenders usually stop accepting payments and start reporting lates.

What is the difference between a lot loan and a land loan?

April 20, 2010 by · Leave a Comment 

There is no universally agreed upon distinction in the industry.  Our lot loan is generally a maximum of 10 acres.  We can go to 20 acres if the property is in a subdivision of similarly sized parcels, as demonstrated by recent comparable sales of vacant parcels.  On all lot loans, no structures are allowed on the property, whether of value or not.  In general, lot loan programs have size limitations, as well as distinctions between finished lots (public water and sewer at the lot line), and unfinished lots which will rely on septic and/or private well, both of which are usually installed when construction begins.  Lots must be buildable, and zone residential.

“Land loans” is a more general category.  Our vacant land loan is for rural/agricultural acreage with limitations.  That particular program won’t allow a residence on the property, but would allow outbuildings like sheds or barns if not given value.  These properties would be zoned agricultural or agricultural/residential, and also must be buildable (see the program description for other limitations).  Vacant land zoned commercial, industrial, multi-family or property that can be subdivided is very difficult to finance these days.  One reason may well be the fact that to obtain a commercial construction loan or a land development loan is this difficult mortgage market, the land would probably have to be free and clear for the deal to “pencil out”.  Commercial banks then have no motivation to do a vacant land loan, and they don’t want to take back non-income producing property.