Land Loan Calculator

Understanding Land Loans

Land loans finance parcels of land: raw (no utilities), unimproved (partial utilities or access), and improved (ready to build). Because land has fewer income-producing alternatives and more valuation uncertainty than houses, underwriting is conservative: larger down payments, higher APRs, shorter terms, and tighter loan-to-value (LTV) caps. Knowing the terminology—perc tests, easements, zoning, and access—prevents surprises at closing and helps you negotiate better.

How to Use the Land Loan Calculator

1. Enter land price, down payment, APR, and term; add origination and other fees if financing them.
2. Include annual property taxes; the calculator estimates insurance and maintenance for an all-in monthly view.
3. Review monthly payment, total interest, and total ownership cost; adjust inputs to fit your budget and LTV target.

Key Math and Formulas

Land Loan Types

• Raw Land: No utilities or access; highest APR, largest down payments, lowest LTV.
• Unimproved Land: Some utilities or access; middle of the pack on pricing and LTV.
• Improved/Lot Loans: Ready-to-build lots with utilities and access; best pricing and longest terms.
• Owner Financing: Flexible underwriting; negotiate APR, term, balloon, and cure rights carefully.

Common Requirements

• Recent survey; legal access; recorded easements.
• Zoning confirmation for intended use; HOA/POA rules if applicable.
• Utility availability: power, water, sewer/septic (perc test results), internet.
• Environmental checks: wetlands, flood zones, endangered species, timber/mineral rights.

Rates, Down Payment, and Terms

Land APRs typically run 1–3% higher than mortgages; down payments of 20–50% are common. Terms range from 5–20 years for many lots, up to 30 years for improved properties. Lower LTV (bigger down) improves approval odds and pricing. If cash is tight, consider a smaller parcel or an owner-financed bridge with a clear exit.

Fees and Closing Costs

• Origination and underwriting; appraisal (land-specific); title search and insurance.
• Recording, survey, septic/perc tests, utility tap or capacity fees.
• HOA/POA dues, if applicable; attorney or escrow fees.

Land Valuation and Appraisal Methods

Unlike residential appraisals that lean heavily on comparable home sales and cost approaches, land appraisal combines data from recent per-acre sales, highest and best use, access, utility availability, topography, and entitlement status. Appraisers may adjust per-acre values for lot size (smaller lots often command higher per-acre prices), road frontage, soil class, flood zones, timber value, and development potential. Where comps are scarce, cost and income approaches (for agricultural or commercial parcels) support value. Expect conservative valuations for raw or unique properties.

• Per-acre comps: Normalize sales by acreage; adjust for access, utilities, and improvements.
• Highest and best use: Zoning and realistic development timelines matter to value.
• Adjustments: Slope, soil, floodplain, timber/clearing costs, and view corridors affect price.
• Entitlements: Approved plats and permits materially improve value and lower perceived risk.

Zoning, Entitlements, and Permits

Confirm the parcel’s zoning and allowable uses with the local planning office and review any overlays. If you intend to build, understand the path from raw land to building permit: subdivision rules, setbacks, minimum lot size, driveway permits, stormwater plans, and utilities. Entitlements can be the difference between a speculative holding and a build-ready lot. Lenders scrutinize entitlement status when deciding LTV and term.

• Request a zoning verification letter; ask about overlays (e.g., coastal, historic, conservation).
• Check minimum frontage, setbacks, and height limits; confirm driveway and curb-cut rules.
• Understand subdivision requirements if you expect to split the parcel in the future.

Utilities and Access

Access and utilities drive value and financing options. A parcel without legal access or realistic utility paths is significantly harder to finance. Document legal ingress/egress (recorded easements), utility availability (water, sewer/septic, power, fiber), and installation costs. For septic, a favorable percolation test is often critical.

• Legal access: Recorded road easements or public road frontage; avoid prescriptive access alone.
• Water/sewer: Verify tap fees, capacity, or well/septic feasibility; obtain perc test where required.
• Power and fiber: Distance to nearest pole/pedestal; cost estimates for extensions.

Environmental and Survey Considerations

A recent boundary survey reduces risk of encroachments and acreage disputes. Environmental diligence ranges from basic flood and wetlands checks to Phase I environmental site assessments for commercial or previously industrial land. Timber, mineral, and water rights vary by region and may be severed from surface rights—confirm what conveys.

• Review FEMA flood maps and any locally mapped floodways or floodplains.
• Check wetlands (National Wetlands Inventory) and endangered species habitats.
• Order a Phase I ESA for commercial acreage or if past use raises concerns.

Financing Products and Structures

• Lot loans (improved): Best pricing; down payment often 10–30%; terms up to 20–30 years in some markets.
• Raw/unimproved land: Higher APR and down payment (20–50%+); shorter terms (5–15 years typical).
• Construction-to-perm: Finance lot plus build with draws; converts to a mortgage at completion.
• Owner financing: Flexible; negotiate interest, amortization, and balloon; use title/escrow and record the deed of trust/mortgage.
• USDA/Ag/Local bank programs: Agricultural borrowers may qualify for specialized terms; check eligibility.

Down Payment and LTV by Land Type

LTV caps vary by land type and lender policy. The more ready-to-build a parcel is, the higher the permissible LTV tends to be. Improving utilities, road access, and entitlements can unlock better financing tiers.

• Raw land: LTV 50–70% typical; down payment 30–50%+
• Unimproved: LTV 60–75% typical; down payment 25–40%
• Improved/lot: LTV 70–90% typical; down payment 10–30%

60 vs 120 vs 180 vs 240 Months

Shorter terms minimize total interest but raise the monthly payment. Longer terms smooth cash flow and are more common for improved lots or higher-value parcels. Use the calculator to quantify total interest and align the term with your expected holding period and improvement timeline.

Example Scenarios

Improved Lot — $80,000 at 8.0% for 180 Months

• Down payment: 20% ($16,000); Financed principal after fees ˜ $65,000
• Estimated payment ˜ $621/mo; Total of payments ˜ $111,780; Total interest ˜ $46,780

Build-ready utilities and paved access support a longer term. Consider a construction-to-perm when your plans are approved to combine build financing and lock a mortgage rate.

Raw Land — $60,000 at 9.2% for 120 Months

• Down payment: 35% ($21,000); Financed principal after fees ˜ $40,500
• Estimated payment ˜ $513/mo; Total of payments ˜ $61,560; Total interest ˜ $21,060

Higher APR and larger down payment reflect greater lender risk. Improvements such as access and perc can justify refinancing later at better terms.

Recreational Acreage — $150,000 at 8.6% for 180 Months

• Down payment: 30% ($45,000); Financed principal after fees ˜ $108,000
• Estimated payment ˜ $1,062/mo; Total of payments ˜ $191,160; Total interest ˜ $83,160

Large parcels with limited utilities often carry higher down payment requirements. If you plan to add a cabin or utilities, model the future refinance path.

Owner Financing Pros and Cons

• Pros: Flexible underwriting, potential for lower closing costs, faster close.
• Cons: Higher APR at times, balloon clauses, due-on-sale risks; ensure proper recording and escrow.
• Best practice: Use a purchase contract addendum that spells out amortization, payment schedule, late fees, cure rights, and balloon date.

Lot Loan vs. Construction-to-Perm

A common path is acquiring a build-ready lot with a lot loan, then transitioning to a construction-to-perm loan when plans and permits are approved. The construction loan funds draws to the builder and converts into a permanent mortgage at completion, combining closing costs and letting you lock a mortgage rate. If you already own the lot free-and-clear, its value can count as equity for the construction loan.

Pre-Approval and Lender Shopping

Start with local banks and credit unions, which often have land-specific programs and understand regional risks. Request quotes with identical assumptions (APR basis, fees, term) for valid comparisons. Confirm prepayment policies and whether extra principal is allowed without penalty.

• Ask if the pre-approval is a soft or hard credit pull and when a hard pull happens.
• Request a fee worksheet showing origination, appraisal, survey, recording, and title charges.
• Clarify whether taxes and fees can be financed or must be paid at closing.

Balloon and Interest-Only Structures

Balloon notes feature a lump-sum payoff at maturity; payments are lower during the term but leave a large balance. Interest-only periods keep payments minimal while you entitle or plan improvements. Both require an exit strategy—sale, refinance, or construction loan—before the balloon date. This calculator models fully amortizing payments; to approximate a balloon, compute the payment for the interest-only or short amortization period and estimate the residual principal at the balloon date.

Refinancing After Improvements or Entitlements

Adding utilities, securing a perc, or obtaining approvals can raise appraised value, lower LTV, and qualify you for better terms. After improvements, request a new appraisal and compare refinancing options, balancing closing costs against projected interest savings and your expected holding period.

Negotiation Checklist

• Negotiate price and contingencies (survey, perc, inspection) before financing terms.
• Use pre-approval to anchor expectations and prevent add-on fee creep.
• Request written lender quotes with APR, payment, financed amount, and all fees.
• Confirm access, easements, and zoning in writing; do not assume verbal assurances.

Documentation Checklist

• Government ID, proof of address, income documents (W-2/1099/pay stubs, tax returns as required)
• Bank statements and list of obligations; source of down payment funds
• Purchase agreement, legal description, most recent survey, and title report
• Zoning letter, HOA/POA docs, utility availability confirmations, perc/septic documents

Glossary

• LTV: Loan-to-value ratio—loan amount divided by appraised value.
• Perc test: Measures soil absorption to determine septic suitability.
• Easement: Legal right for access or utilities across a property.
• Entitlements: Governmental approvals allowing specific uses or development.
• Balloon: Lump-sum payment due at the end of a loan’s term.
• Construction-to-perm: Loan that funds construction and converts to a mortgage.

Due Diligence Checklist

• Pull zoning map and confirm allowed uses; check setbacks and density limits.
• Obtain a recent boundary survey; verify ingress/egress and encroachments.
• Run a perc test or verify sewer availability; confirm water rights and well permits.
• Check flood maps, wetlands inventories, and soil maps; inspect for fill or contamination.
• Confirm utility easements, tap fees, and lead times; ask providers for make-ready costs.
• Review title for liens, mineral/timber rights, and deed restrictions.

From Lot to Build: Construction Pathways

If you plan to build, lenders may offer lot + construction packages with draws, inspections, and a conversion to permanent mortgage at completion. Keep contingencies for cost overruns and rate changes. If you stage development (driveway, utilities, septic, grading), re-run the calculator as improvements raise appraised value and may justify a refinance.

Owner Financing and Balloons

Owner financing can simplify approval and speed closing, but terms vary: larger down, higher APR, shorter amortization, and balloon payments are common. Negotiate cure periods, prepayment rules, and assignment. Always close through title/escrow and record the lien properly.

Case Studies

Raw Acres with Septic

A buyer purchased 10 raw acres. A successful perc test and recorded access moved LTV from 60% to 70% and secured a lower APR. Staging utilities over two years allowed a refinance to a lot loan with improved pricing.

Build-Ready Lot Near Utilities

An improved lot with nearby utilities qualified for 80% LTV at a bank that specializes in local land. The buyer financed fees, budgeted for impact/tap fees, and used a construction-to-perm product six months later.

Owner-Carry with Balloon

A seller offered 25% down, 8.5% APR, amortized over 15 years with a 5-year balloon. The buyer planned improvements and a refinance into a lot loan within 24 months after value increased.

Common Mistakes to Avoid

• Skipping surveys or access verification.
• Assuming utilities are available without written confirmation.
• Underestimating tap fees, impact fees, and timeline for connections.
• Not planning an exit for balloon or interest-only structures.

Glossary

• Perc Test: Soil percolation test for septic viability.
• Easement: Legal right to use another’s property for access or utilities.
• Improved Land: Parcel with utilities/access suitable for building.
• Balloon: Lump-sum payoff due before full amortization.

Frequently Asked Questions

Further Reading

See Land loan (Investopedia) and Perc test.

Related Tools

• Car Affordability Calculator
• RV Loan Calculator
• Boat Loan Calculator