Bank Loan on Recreational Land [Archive] - Glock Talk

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whitebread
10-25-2012, 14:11
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:

boomhower
10-25-2012, 14:18
Most big banks won't do it. Credit unions usually will.


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devildog2067
10-25-2012, 14:27
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:

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.

hkg3
10-25-2012, 14:41
Would it be possible to build a small hunting cabin on the land without incurring significantly high costs?

whitebread
10-25-2012, 15:59
If it wasn't clear, I already have a loan...I was just trying to shop interest rates.

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.

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.

Would it be possible to build a small hunting cabin on the land without incurring significantly high costs?

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.

jrayharder
10-25-2012, 21:14
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.