The reason you want to refinance your land will play a part in deciding how to approach the matter. If you want to refinance to get money to improve the property, by adding utilities or other improvements in preparation for developing it, you will approach it as an improvement loan to add value. If the land has increased in value and you want to just take money out to pay other debts, you will need other approach to asking for your loan. If you just want to lower the payments, you will need another avenue. The methods of refinancing, however, are similar.
Approach your current lender and explain why you want to refinance. Make sure your payments are up to date and you have a recent appraisal of the property to demonstrate its present value. Use a tax assessor's appraisal or have one done by a professional appraiser so you know what the value is when you ask for a loan. Make a record of any improvements or other changes to the land since your original loan.
Demonstrate plans for development, if that is your goal, or get recent sales of property in the area to show how value has increased if you want to take money out. Have a firm plan for lengthening the term of the loan if you just want to decrease monthly payments and be prepared to explain why you need to cut the payments.
Shop other lenders to check interest rates and other terms. Search for lenders who specialize in land loans, especially if the land is a farm or undeveloped property. Use a mortgage broker who is in contact with many lenders and may be able to find a better deal on refinancing. Provide the broker with all the details on your current loan, any improvements made or planned and other supporting information.
Get the exact payoff amount on your current loan, including any penalties for early payment. Explain clearly to proposed lenders why you need more than the payoff for a new loan. Investigate any savings for title searches, new surveys or other loan preparations to determine whether to stay with your current lender or switch; you may save money by refinancing with your current lender.
Items you will need
- Land contract and records
- Development plans
- Comparable land sales
- Be cautious about refinancing land whose value has declined. You may have difficulty and wind up having to pay higher interest.