How long are land loan terms?
Land loan terms are short compared with mortgages: typically 12 to 24 months from private lenders, three to five years at banks (sometimes amortized over ten to twenty years with a balloon), and three to ten years on seller-carried notes. Lenders keep terms short because land produces no income and they want to see the plan move.
By source
| Source | Typical term | Payment structure | Extension |
|---|---|---|---|
| Private or hard money | 12 to 24 months | Interest only | 6 months for 0.5 to 1 point |
| Bank or credit union | 3 to 5 years | Interest only, or 10 to 20 year amortization with a balloon | Renewal at the bank's discretion |
| Seller carry | 3 to 10 years | Interest only or amortized, usually with a balloon | Negotiable |
| Farm credit | Up to 20 years | Amortized | Standard |
Ranges vary by lender.
Why terms are short
A lender on land wants the borrower to do something with it: entitle, build, subdivide, or sell. A short term forces the plan forward and gives the lender a checkpoint. Long-term land loans exist mostly in agriculture, where the land produces income.
Matching the term to the plan
Build within a year. A 12 to 24 month private loan or a bank loan, paid off by the construction loan.
Entitle over one to two years, then build. A bank loan of three years, or a private loan with an extension option. Set maturity six months past the realistic permit date.
Hold for appreciation. Seller carry or a bank loan with amortization. Private money is too expensive to hold land for years.
Subdivide and sell lots. A bank or private loan with partial release provisions so each lot sale pays down the loan and releases that lot.
The balloon
Bank land loans amortized over twenty years with a five-year balloon have a low monthly payment but a large payment at maturity. Plan the refinance or the construction loan before year four. A balloon on land is not automatically renewed.
Extensions
Private lenders build in extensions for a fee. Banks renew at their discretion, based on the plan's progress and your financials. Ask about extension terms before signing, and request one in writing at least 60 days before maturity.
The cost of time
On a $400,000 private land loan at 12 percent, each month costs $4,000. A plan that slips a year costs $48,000 in interest plus extension fees. When the timeline is uncertain, a bank loan or seller carry with a longer term is worth the extra effort to arrange.
How CommFi handles it
Our lending desk sets the land loan term to your permit and construction timeline with a cushion, and prices the construction loan at the same time so the exit is planned. It funds direct when it fits, and when a bank or seller-carry structure is the better source, the desk searches a database of 7,000+ lenders and the ones that fit compete for the file. Zero upfront fees.
Related reading
Related questions
- How long is a typical land loan?
- Twelve to twenty-four months from private lenders, three to five years at banks, and three to ten years on seller notes.
- Can I get a 20-year land loan?
- Usually only through farm credit lenders for agricultural land, or as a bank amortization with a balloon at three to five years.
- What is a balloon on a land loan?
- A large payment of the remaining balance at maturity, common on bank land loans amortized over a longer period.
- Can a land loan be extended?
- Private lenders usually offer six-month extensions for a half to one point. Banks renew at their discretion. Ask in writing before maturity.
- How long should my land loan be?
- Six months past the realistic permit or sale date. Time is the main cost on a land loan.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.