Question about Property Equity

[Evoloution]

Do Banks hold land as equity. I have two pieces of land in separate areas. Will the bank hold one of them as equity in order to give me funds to build on the other and if so what is the usual period of time i.e. 15 years..20 years and interest rates.

[rspann]

Or you could sell me one piece and use the cash to build,easy and no interest.

[Redman]

You are asking about Collateral.
And the answer is yes.
The 2 plots of land are assets-if there is an agreed to value and they are un encumbered and clear title the banks will accept them as security/collateral for financing.
Especially if it is financing for improving one of the said pieces of property

Equity would be what is left over after you assess the value of the asset and subtract any debt you owe.


so 2 lots of land each 500k -total worth is 1M
No Debt.

Use the 1M worth of land to secure 600k in financing.-COLLATERAL

Improve one piece...so now you have a piece worth 500k and the improved piece which may have a market value of 1.4(500+Improvements SHOULD give you a higher market value than the cost of improvements)

Your market value is now 1.4+500 = 1.9M

Less your debt of 600k

Leaving YOUR Equity in the venture as 1.3M.
In terms of time I think if you are building a house you can get a normal mortgage up to 30 years subject to your age etc.

I hope this helps

[Evoloution]

but with the example.....the 600K in financing is usually at what max period and interest rate

[Bad Dog]

Do Banks hold land as equity?
Yes, the banks could hold the land as collateral for a loan. Also, the banks will take both parcels of land as security that you are offering. However, you should take a more traditional/realistic approach to obtaining financing for building the house, providing the land is approved by Town & Country for residential building.
Make sure that you obtain all the necessary approvals and estimated cost of building for the house and ask your bank for a mortgage to build the house. Most likely, if you qualify for the mortgage, they will offer bridge financing, i.e. they will make advances as the building progresses and on completion (the value of the property will be increased land + building) they will finalize the mortgage amortised over 15, 20 or 25 years.