Can I get a construction loan on land I already own?
Yes, and owning the land is the easiest way to fund a first build: the lender counts the land at purchase price or appraised value as your equity and typically funds 70 to 85 percent of total project cost, capped at 65 to 75 percent of the completed value. If the land is worth 20 to 30 percent of the total project, you may bring little or no additional cash beyond reserves.
How your land is counted
| Situation | Value the lender uses |
|---|---|
| Bought within about 12 months | Purchase price |
| Held longer than 12 months | Appraised value |
| Entitled or improved since purchase | Appraised value, often higher |
| Land with an existing loan | Value minus the payoff |
Ranges vary by lender.
A worked example
Land worth $350,000, free and clear. Build cost $1,100,000 including a 10 percent contingency and interest reserve. Total cost $1,450,000. At 80 percent loan-to-cost the loan is $1,160,000, and the completed appraisal of $1,750,000 at 70 percent allows $1,225,000, so the cost limit controls. Construction funds of $1,160,000 exceed the $1,100,000 build cost, so you bring closing costs and reserves only. If the lender caps at 75 percent of cost, the loan is $1,087,500 and you bring about $12,500 plus costs and reserves.
What the loan looks like
- Term: 12 to 24 months, interest only on drawn funds.
- Rate: 9 to 13 percent private; prime plus 1 to 2.5 percent at banks.
- Points: 1 to 3.
- Draws: Monthly or by milestone, with inspections.
- Interest reserve: Built into the budget for the construction period plus lease-up.
Documents you will need
- Deed and title report on the land.
- Stamped plans and approved permits, or a firm permit date.
- Line-item budget with contingency.
- Fixed-price contract with a licensed general contractor.
- Builder's risk and liability insurance.
- Personal financial statement and reserves, often 10 percent of the loan.
- Exit: a permanent loan pre-qualification or sale comps.
Where it gets stuck
- Permits not in hand. Until entitled, the project is a land loan, not a construction loan.
- Appraisal lower than cost. The value cap shrinks the loan and you cover the gap.
- Thin reserves. Land equity does not substitute for cash reserves.
- Existing land loan. The payoff reduces the equity the land contributes.
Compared with buying land and building together
Buying and building at once usually needs 25 to 35 percent cash across the whole project. Owning the land already turns that into equity the lender can see, which is why lenders like these files and why first builds on family land or long-held parcels get approved more often.
How CommFi handles it
Send the plans, budget, and land documents in one application. Our lending desk prices the project first and funds direct when it fits. When the project needs a construction specialist for your asset type or market, the desk searches a database of 7,000+ lenders and the ones that build there compete for it. Zero upfront fees.
Related reading
Related questions
- Does my land count as the down payment on a construction loan?
- Yes. Lenders count it at purchase price if bought recently or appraised value if held about a year or longer.
- Can I get a construction loan with no cash down if I own the land?
- Often, when the land is worth 20 to 30 percent of the total project. You still need reserves, typically 10 percent of the loan.
- What if there is still a loan on the land?
- The construction loan pays it off at closing, which reduces the equity the land contributes.
- Do I need permits to get a construction loan on my land?
- Most lenders want approved permits at closing or a firm date. Before that, the land is financed with a land loan.
- How much will a lender finance on a build on my own land?
- Typically 70 to 85 percent of total cost, capped at 65 to 75 percent of the completed appraised value.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.