Obtaining Finance For Land Purchase South Africa

It is indeed a tough task to avail land loan when compared to a mortgage. Land loan can be termed to be a credit type that is used for financing land purchase. Often, it is referred to as a lot loan. It can be derived if you plan to purchase a land to construct a home for your family. Such loans can also be availed to purchase land for business purpose.

About land loan

The loan type that you plan to take out and the qualification process will be based on the area to make the purchase and its intended use. Before applying for finance for land purchase south africa, you need to know what is land loan all about! You may perhaps have decided to buy a plot of land and construct a home from scratch. Such loans are available to finance your land, be it for residential or commercial purpose.

How does it work?

Land loan, in general, works quite similarly to that of the standard mortgage. In case you get approved for such loans, then your lender offers the funds allowing you to purchase your chosen plot. You will have to pay the lender the principal along with the interest within a specified timeframe. However, trying to qualify for Property Development Funding In South Africa is tougher when compared to deriving regular mortgage. The reason is lenders find this segment a bit risky.

What is expected from borrowers?

Borrowers are required to have excellent credit score to be approved of their loan. They also need to provide a clear explanation on the exact purpose of applying for the loan. Also, you are required to highlight several aspects concerning the property desired to be checked. It includes access to utilities, surveyed boundaries, land use restrictions and zoning, etc. Such factors are likely to provide the lenders with a fair idea of risky factor involved in the loan.

Granting loan

Be it residential or Commercial Development Finance, the lenders will first ensure they are satisfied with the explanation offered by the applicant on the reason for requesting for loan. It is after considering the different aspects that obligations and rates for land loan is issued. Interest rates on land loan are likely to be a bit higher when compared to the standard mortgage rates. However, lower debt-to-income ratio combined with a high credit score can help reduce considerably interest rates.

Is buying a land a wise investment?

There are several aspects to be understood to know if your plan to invest in a plot of land will prove to be a good investment or not. It depends upon where the land is located and purposes it is to serve. Purchasing ready-to-build land, for instance, as primary/secondary home tend to have varying degree of risks when compared to investing in a land meant for farming purpose.