close

Privacy guaranteed - Your email is not shared with anyone.

Bank Loan on Recreational Land

Discussion in 'The Okie Corral' started by whitebread, Oct 25, 2012.

  1. whitebread

    whitebread ΜΟΛΩΝ ΛΑΒΕ

    Joined:
    Nov 29, 2010
    Messages:
    824
    Likes Received:
    0
    Location:
    Raleigh, NC
    I am buying some land for hunting (63 acres). It is overgrown farmland and is classified as agricultural. I am getting a loan through an agricultural lender (and putting 50% down), but I decided to call around just to compare interest rates.

    I was shocked to find most banks will not give loans on unoccupied land...regardless of how much you put down. I found a few that would give a loan with the stipulation a house must be built on it within six months or a year. Not a single one would loan money for a recreational property with no plans of putting a building on it.

    Is this a result of the bad loans of a few years ago? Or has it always been like that? Most of the people I talked to didn't understand why someone would want a plot of overgrown farmland.

    I am just flabbergasted over this. In my mind, it would be a pretty safe loan for the banks. It isn't like there is a factory down the road pumping out good hunting land. :dunno:
     
  2. boomhower

    boomhower

    Joined:
    Feb 14, 2010
    Messages:
    3,323
    Likes Received:
    2
    Location:
    North Carolina
    Most big banks won't do it. Credit unions usually will.


    Sent from my iPhone 4S using Tapatalk
     

  3. devildog2067

    devildog2067

    Joined:
    Apr 20, 2005
    Messages:
    16,325
    Likes Received:
    1,125
    Location:
    Chicago
    The reasoning is that if you were to fall on financial hard times, probably the first thing you'd stop making payments on is a piece of undeveloped land you were only using for recreation. Even if the bank forecloses on it and makes money, it's not worth the risk of default.
     
  4. hkg3

    hkg3 Beer Geek

    Joined:
    Oct 4, 2007
    Messages:
    115
    Likes Received:
    6
    Location:
    PA
    Would it be possible to build a small hunting cabin on the land without incurring significantly high costs?
     
  5. whitebread

    whitebread ΜΟΛΩΝ ΛΑΒΕ

    Joined:
    Nov 29, 2010
    Messages:
    824
    Likes Received:
    0
    Location:
    Raleigh, NC
    If it wasn't clear, I already have a loan...I was just trying to shop interest rates.

    What you say makes sense - I would guess the rate of default is higher on recreational or vacation property. I don't agree about the risk if the down payment is high, but I am not the one lending money.

    You can do a tiny kit cabin for a few grand (not much more than a shed), but I am guessing there are requirements on the housing. ;) 100k in property and 4k on a 'home' might raise a few eyebrows with the banks board of directors. So knows, though, I have seen lots of land with a run down trailer on it advertising '30 year loan available' and stuff like that.
     
  6. jrayharder

    jrayharder

    Joined:
    Jul 14, 2006
    Messages:
    176
    Likes Received:
    5
    I don't think a farmer would have as much trouble obtaining a loan as a non farmer would. I was recently quoted 3.4% on a 10 year loan on ag land.