Calculate monthly payments for raw land, improved lots, and vacant land loans. Compare loan programs, balloon payments, and affordability with amortization schedules.
Utilities available, road access, survey complete
5.5–8.5%
15–25%
10–25 years
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Land loans work differently from traditional mortgages. Because vacant land lacks a structure as collateral, lenders charge higher interest rates (typically 6-12%) and require larger down payments (20-50%). Our land loan calculator accounts for these differences across four land types: raw land, unimproved land, improved lots, and subdivision lots.
A land loan finances the purchase of vacant land or a lot. Unlike home mortgages backed by a habitable structure, land loans carry more risk for lenders because undeveloped land is harder to sell in foreclosure. This means borrowers face shorter loan terms (3-20 years), higher interest rates, and larger down payment requirements. Land loans come in several forms: conventional bank loans, USDA Rural Development loans, seller financing, farm credit loans, and home equity loans used for land purchases.
Monthly Payment Formula
M = P x [r(1+r)^n] / [(1+r)^n - 1]See how rates and terms differ between raw land, unimproved land, improved lots, and subdivision lots to make an informed purchase decision.
Many land loans use balloon structures with lower monthly payments but a large lump sum due at the end. Calculate the exact balloon amount to avoid surprises.
Use the affordability calculator to work backward from your monthly budget to find the maximum land price you can comfortably finance.
Evaluate different loan scenarios side by side including conventional loans, USDA programs, and seller financing to minimize total interest costs.
Land loans often have hidden costs including property taxes on vacant land, higher insurance requirements, and shorter amortization periods that increase monthly payments.
Purchase a lot now and build later. Many buyers secure land with a land loan, then refinance into a construction-to-permanent mortgage when ready to build.
Finance farmland, ranch land, or rural acreage. USDA Rural Development loans and Farm Credit institutions offer specialized programs for agricultural land purchases.
Buy vacant land as an investment, holding it for appreciation. Land in developing areas can significantly increase in value as infrastructure and demand grow.
Finance hunting land, lakefront property, or mountain lots for recreational use. These purchases typically require conventional financing with higher down payments.
Purchase improved lots in new subdivisions with existing roads, utilities, and zoning approvals. These lots qualify for the best land loan terms.
Negotiate directly with the land seller for financing. Seller financing often provides more flexible terms but may carry higher interest rates.
Land loan rates are typically 1-3% higher than traditional mortgage rates. Raw land carries the highest rates (8-15%), while improved lots in subdivisions get the best rates (5-8%). Your credit score, down payment size, and the land type all affect your rate.
Down payment requirements vary by land type: raw land typically requires 30-50% down, unimproved land 25-40%, improved land 20-30%, and subdivision lots 15-25%. USDA loans may offer lower down payments for qualifying rural properties.
A balloon payment is a large lump sum due at the end of the loan term. Many land loans use balloon structures where you make smaller monthly payments for 3-10 years, then must pay the remaining balance in full. You can pay it off, refinance, or sell the property before the balloon comes due.
Most land loans have terms of 3-20 years, much shorter than traditional 30-year mortgages. Improved lots may qualify for terms up to 20-25 years. For longer terms, consider a USDA loan (up to 33 years for qualifying rural land) or obtain a construction-to-permanent loan that converts to a standard mortgage.
Raw land has no utilities, roads, or infrastructure and is the riskiest to finance. Unimproved land may have basic access but lacks utilities. Improved land has roads, water, sewer, and electricity available. Subdivision lots are fully improved with all utilities and zoning approvals in place.
Interest on a land loan is generally not tax deductible unless you build a home on the property and the loan becomes part of your home mortgage. Property taxes on the land itself are typically deductible as an itemized deduction. Consult a tax professional for your specific situation.
The USDA Rural Development program offers loans for purchasing land in eligible rural areas. USDA loans can offer lower down payments (sometimes as low as 0% with a home package), competitive interest rates, and longer terms up to 33 years. The property must be in a USDA-eligible area and the borrower must meet income limits.
Seller financing can be a good option if you cannot qualify for traditional bank financing. Benefits include flexible terms, faster closing, and potentially lower closing costs. Drawbacks include typically higher interest rates (8-12%), shorter terms (5-10 years), and the risk that the seller may not hold clear title. Always hire a real estate attorney to review seller-financed land deals.