A land loan finances the purchase of a plot of land without any structures. It's different from a mortgage because lenders consider undeveloped land riskier — it generates no income and is harder to sell if you default.

How much down payment do I need to buy land?

Raw land typically requires 35–50% down. Improved lots (with utilities) require 20–35%. Farm land may qualify for USDA programs with lower requirements. The larger the down payment, the better your rate.

Are land loan rates higher than mortgage rates?

Yes. Land loan rates are typically 1–3% higher than mortgage rates because land is considered higher risk. Raw undeveloped land has the highest rates, while improved lots with utilities and road access qualify for better pricing.

What is the maximum land loan term?

Most land loans have shorter terms than mortgages — typically 5 to 15 years. Some lenders offer 20-year terms on improved lots. The shorter terms mean higher monthly payments but less total interest.

Can I use a land loan to buy farm land?

Yes, but farm land may have specialized financing options including USDA Farm Service Agency loans, Farm Credit System lenders, and agricultural lenders that offer better terms than a conventional land loan from a bank.

Land Loan Calculator

Calculate monthly payments and total cost for buying raw land, improved lots, or farm land. Land loans have different rates and requirements than mortgages.

Land Type

Land Price

Down Payment

$30%

Raw land loans typically require at least 35% down ($52,500).

Interest Rate

Loan Term

Raw land (no utilities, no roads) carries the highest lender risk — expect higher rates and larger down payment requirements.

Monthly Payment

$1,274

$105,000 loan · 8.00% · 10-year term

Down Payment: $45,000

Principal: $105,000

Total Interest: $47,873

Loan Amount

$105,000

Down Payment

30.0%

Total Interest

$47,873

Total Loan Cost

$152,873

Total All-In Cost

$197,873

Interest as % of Price

31.9%

How to Use This Land Loan Calculator

Select your land type, enter the purchase price, down payment, and financing terms to see your monthly payment and total cost.

Land Type Selection

The land type affects both the expected interest rate and required down payment. Raw land (no utilities, no roads) carries the highest lender risk. Improved lots with available utilities and road access are easier to finance. Farm land may qualify for USDA Agricultural programs with better terms.

Down Payment

Unlike mortgages, land loans require substantial down payments. The calculator warns you if your down payment falls below the typical minimum for your land type. A larger down payment reduces risk and often unlocks better interest rates.

Land Loan Payment Formula

Loan Amount = Land Price − Down Payment

Monthly Payment = P × [r(1+r)^n] / [(1+r)^n - 1]

Where:
P = Loan Amount
r = Monthly rate (annual rate ÷ 12)
n = Term in months (years × 12)

Typical Down Payment Requirements:
Raw Land: 35–50% · Improved Lot: 20–35% · Farm Land: 30–40%

Example: $150,000 land parcel with 30% down ($45,000). Loan = $105,000 at 8.0% for 10 years: monthly payment = $1,273. Total interest = $47,760. Total cost including down payment = $197,760.

Example: Buying a Rural Lot in North Carolina

The Pattersons' Future Building Site

They found a 5-acre improved lot with electric and water access for $120,000. Planning to build in 3–5 years.

Land Type	Improved Lot
Land Price	$120,000
Down Payment (25%)	$30,000
Loan Amount	$90,000
Interest Rate	7.5% (improved lot)
Loan Term	10 years
Monthly Payment	$1,069
Total Interest	$38,280
Total Loan Cost	$128,280

When they're ready to build, the land equity can serve as part of the down payment on a construction loan. Their $30,000 cash down payment plus any appreciation in land value provides a strong equity foundation.

Frequently Asked Questions

A land loan is a specialized mortgage for purchasing undeveloped land — a plot without a home on it. It's different from a construction loan (which funds building) or a regular mortgage (which has a home as collateral). Lenders consider bare land riskier because it generates no rental income, has limited market comparables, and is less liquid than a house.

Down payment requirements depend on land type: Raw land typically needs 35–50% down. Improved lots (utilities, roads) need 20–35%. Farm land through USDA FSA may have lower requirements. Some seller financing arrangements allow lower down payments. The higher the down payment, the better the interest rate you'll receive.

Yes, typically 1–3% higher. Raw undeveloped land rates are highest. Improved lots with utilities and road access have lower rates. Some rural land near growing suburban areas qualifies for competitive rates from local banks or credit unions. Farm Credit System lenders specialize in agricultural land and often have the best rates for farm purchases.

Options include: (1) Conventional land loans from banks and credit unions; (2) USDA loans for rural land in eligible areas; (3) Seller financing — the seller acts as the bank, often with lower down payments; (4) Home equity loan or HELOC on your current home if you have equity; (5) Farm Credit System for agricultural land. Seller financing is often the most flexible option for raw land.

Yes. Land you own free and clear (or with significant equity) can be used as collateral or as part of your down payment when applying for a construction loan. Lenders typically count the land value as equity toward the 20–25% construction loan down payment requirement. If land has appreciated since you bought it, you may have more equity than you paid in.

Land Loan Calculator

How to Use This Land Loan Calculator

Land Type Selection

Down Payment

Land Loan Payment Formula

Example: Buying a Rural Lot in North Carolina

The Pattersons' Future Building Site

Frequently Asked Questions

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