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Ok, I own 3 acres with a pond located on it. I am thinking of building a home there. ( I have no idea what it’s worth)

I’m assuming once the appraisal of the land is done the bank will use that equity and put it towards, let’s say “20% down” towards a construction/home loan?

4 Thoughts on Question in regard to owning land & equity – building a home?
  1. Reply
    January 24, 2013 at 8:12 am

    yes they will use taht as down payment if it is held free and clear

  2. Reply
    Steph G
    January 24, 2013 at 8:48 am

    That is what should happen. Be prepared right away for hassles with the DER because of the pond and their desire to “protect” it. Later on you may have difficulty with needing to get flood insurance (depending on how the pond is fed).

    If you get a construction loan, you will need to take all the builder’s info (including his insurance info) to the bank. When a construction loan is approved, they hand out what are called “draws.” This means the builder gets 25% of the cost to start. They will set up times to come out and inspect and photograph the project, and he will get his draws in 25% pay-outs. They hold onto the last draw until all inspection folks have been satisfied, the work was completed to the specs on the plans, and the local authorities (i.e., zoning people/building permit folks) are satisfied.

    Congratulations and good luck!

  3. Reply
    January 24, 2013 at 9:40 am

    They will put a value on the land and use it like they would cash. If amount you owe vs what the land is worth fit in the banks parameters you are good to go.

    That is how it worked for me.

  4. Reply
    January 24, 2013 at 10:03 am

    Get a new first mortgage and take cash back at closing There are changing rules for how high of an LTV (“or loan to value”) of your property is allowed. Next time you sell, you should never put the entire profit from your home into the next ome. Those are dollars you can declare on you tax return and pay zero taxes. Take much of those 100% dollars and invest them in a tax-advantaged accounts for your wealth-building and to make your next-egg cushion much more safe for life’s events…college, weddings, unexpected job loss, illness, retirement, etc.

    I learned this from Marian Snow, financial analyst and bestselling author of “Stop Sitting on Your Assets.” There’s a lot to learn from her.

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