Is It Easier to Get a Construction Loan If You Own the Land?
Data shows that 53% of construction projects underperform. In addition, only 31% of construction projects hit their budget numbers. Plus, only 25% of projects hit their delivery deadline. Given the risks that construction projects present, it’s important to prepare before requesting financing. If you own the land where you plan to build, you go into the meeting with the lender with some leverage.
Land builds equity in the same manner as residential properties. If you own the land outright, the lender sees that you bring to the table 100% land equity. Thereafter, the outstanding amount on the land determines its equity.
Lenders use equity as collateral. Given the number of construction projects that falters, lenders search for ways to cover the risk and help their clients achieve their financial goals. If you own the land, obtaining a construction loan is easier.
You can bring other variables to the table too. A guarantor provides you leverage too.
Remember that lenders disperse construction loan funds in increments. It’s the reason why the lender requests the construction crew’s estimated project timetable. The drawdowns minimise risk for the lender and you. Plus, you’re only paying interest on the amount dispersed instead of the total approved.
Own the Land and Construction Loans Conclusion
Individuals who own the land where they aim to build can leverage the land. It helps you qualify for a construction loan. Land builds equity in the same manner that property builds it. To discuss the details, contact our Mortgage House loan specialists. We also offer business loan options.