If you are interested in buying Maine land with owner financing find some great land parcels at our listing page. Are you trying to sell your land? Maybe you should try financing your Maine land sale. Why should you consider this option? Because owner financing can help get your land sold faster and earn you more money. Here are a few reasons why and other things you should know.
Most Banks Don't Offer Land Financing
When a buyer for Maine land is looking for options to finance their purchase they usually start with the bank that holds their checking and savings accounts. In many cases, if the acreage of the parcel is larger than a simple house lot, the lender will not consider the loan. If they do interest rates may be high, or worse, the down payment requirement is not reasonable.
Specialty property types such as Maine timberland investments, hunting/fishing/recreational land, larger waterfront land parcels, farmland and other large acreage properties can be difficult to secure financing for. In Maine there are traditional banks and credit unions that offer attractive terms for land. However, the average buyer looking to purchase land will not know who those lenders are and will often get frustrated with the search. They will naturally look for ways to make the process cheaper or less complicated.
Buyers Prefer Owner Financing
Many buyers prefer the ease and speed that owner financing allows them to purchase land, so they search land for sale with such offers. This gives the land owner who is offering financing terms competitive advantage over other sellers. Although owner financing interest rates are usually higher than a bank rate, the lower down payment requirements, fewer required fees and closing costs combined with a less hassle process are often preferred by potential land buyers.
Not only does it help get your land sold faster, another good reason to finance your land is the interest you can earn. When your Maine land sells, what will you do with the proceeds? If you said "put it in a savings account" why? Unless you need the liquidity cash, your money could be working better for you with amortized payments for the land. The front end of an amortization is mostly interest. Even if the borrower pays off early, you will be assured to collect a return on your investment. Looking at all of the options out there, owner financing can be hard to beat.
Less Risk than other investments
If done properly, holding a first mortgage on your land is a safe position to be in. Should the buyer/borrower default on repayment, you will have the land as security. There will be costs to pay for the foreclosure action should the borrower default. To reduce your risk, require enough down payment to cover your legal expense of recovering the property.
Things to consider
How much down payment should you require? That depends on many factors. Among others these are a few: how much risk are you willing to take, the interest rate you will receive, the buyers qualifications and standing timber values that could be removed.
The process for lending has become more complicated for the land owner than it was just a few years ago. The reason is the need to be in compliance of new federal regulations on lending. You will hear a lot of different opinions from lawyers, land owners, buyers and others about these regulations. We advise our clients to consult with legal counsel and private lending loan originators regarding owner financing to be sure that all legal documents, lending processes and disclosures are complete.