Definition
A land loan (or raw land mortgage) is financing secured by bare land — that is, without a building of significant value on the lot.
**Why it's more difficult**: - Land alone generates little or no income (not rental) - In case of default, land liquidity is lower than built property - Land value is more volatile (depends on zoning, surrounding projects, demand) - Institutional lenders (A banks) generally avoid financing bare land
**Financing options**: 1. **Alternative lenders (Tier B)**: LTV 50-65%, rate prime + 2-5% 2. **Private lenders**: LTV 40-55%, rate 8-14%, term 1-3 years 3. **Vendor financing**: the seller personally extends financing to the buyer (vendor take-back — VTB) 4. **Local credit unions**: some finance land in their local markets with less restrictive conditions 5. **Primary residence refinancing**: use existing home equity to finance the land purchase
**Specific criteria**: - Land connected to services (water, sewer, electricity) → more financeable - Confirmed residential zoning → preferred by lenders - Existing development plan → strengthens the file - Distance from urban services: isolated rural land → very difficult to finance