How to Navigate Land Equity Loans

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Did you know that the land you own can be a potent form of collateral when seeking a loan? Land equity loans operate similarly to home equity loans, utilizing your land as collateral. Simply put, a land equity loan allows you to borrow against the equity in the land you own, where land equity is the value of your land minus the balance of your land loan.

First South Farm Credit emerges as a standout choice for land loans, thanks to its chartered Farm Credit Service status, offering extended payment schedules and flexible terms. However, it’s crucial to recognize that loans from Farm Credit System (FCS) lenders, like First South, are primarily intended for acquiring rural land, making land improvements, or expanding existing farming operations. In contrast, non-FCS lenders may provide more flexibility in fund utilization for Home Equity loans or land equity loans.

John Sport, Vice President of First South Farm Credit, emphasizes that land equity loans are ideal for existing landowners looking to acquire additional rural land or cover land improvement expenses. Structuring the loan for these specific purposes enables borrowers to meet their land financing goals while freeing up cash for other expenses beyond their rural land holdings or farming operations.

One significant advantage of land equity loans is the ability to secure a loan without risking assets such as your home, car, savings, or stocks. Using an existing asset as collateral for a new loan is advantageous, and in certain situations, the land can substitute for a down payment, allowing the borrower to retain their cash.

The amount of land equity required for a loan varies by lender, and while land is generally considered a qualified form of collateral, some lenders may be more open than others. However, it’s essential to understand that using land as collateral ties up the asset for the loan’s duration, and the lender can take possession of your collateral if you fail to meet the loan terms.

To initiate the process, ensure your paperwork is in order, and the property deed is in your name. Verification can be obtained through the County Recorder’s office in the county where the property is located, as land deeds are public records.

Determining the worth of the land is crucial when using it as collateral, and an appraisal may be required before a loan can be approved. Factors such as the land’s condition and current level of development can influence lending terms. The terms of the loan typically depend on the credit quality of the applicant, the loan’s purpose, the applicant’s income stream, and the asset being used as collateral.

First South Farm Credit may lend up to 85% of the land’s value, with the loan-to-value ratio potentially influenced by the loan purpose and borrower strength. Documentation requirements vary, but they often include existing land deeds, mortgages, the applicant’s balance sheet, income information, and verification. For land improvement loans, cost estimates, quotes, and invoices may also be necessary.

Always seek the best possible terms, including favorable interest rates and a preferred repayment length that aligns with your needs. Throughout the process, remember that you have the freedom to explore alternative options and should only proceed if you are comfortable with the loan terms. Land equity loans open up avenues for utilizing your existing assets strategically, offering financial flexibility and potential benefits for landowners.

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Responsibilities of an Executor of an Estate

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Having the responsibility of a deceased’s property is a big thing to take on, especially during such emotional times. Here are some helpful tips which can make the process run more smoothly.

You are entitled to an attorney

Most of the time your loved one will have an attorney who has drafted their estate documents, so you should start by contacting that attorney. They can tell you what your duties will be and also help you file any necessary paperwork. If you do not know or cannot contact the attorney originally used, reach out to an attorney who can help you through the process. An attorney will know the probate laws for your state and can help you as the executor.

You have a fiduciary responsibility

You have the responsibility of your loved ones’ financial interest. So whatever is expressed in their will should be followed. You will need to notify creditors, banks and other financial obligations of the death of your loved one. Make sure to cancel credit cards, subscriptions, recurring payments and let the Social Security Administration know they are no longer living. You are responsible for getting all of the money they owed settled. If this is a problem, you can get a probate attorney to help negotiate debt forgiveness.

Securing and appraising assets

Just because your loved one left you a home doesn’t mean you immediately become the rightful owner. As the executor , you will need to make sure all debts are paid before you distribute anything. Before you sell a loved one’s home, you should have it appraised so you can have a document of the value of the home.

Pay the debts, bills and taxes

Open a separate bank account and put all the funds there so you can make payments out of that. It will be easier to keep track of all transactions associated with the estate. Make sure that all those owed are paid in full before you hand out anything to those that inherited.

Keep beneficiaries in the loop

As soon as you are able, meet with the beneficiaries to explain what all is involved and give them a good time table. You will want to include the attorney so they can outline the will. You want to document everything so that you have a record when you start to hand out payments. You do not want any misunderstandings between you and any of those inheriting.

Work with a finance professional

When dealing with the finances it is a good idea to hire a skilled accountant. This way you know the taxes will be correct as well as all the payments. They can also advise you on ways to keep the estate solvent while you are working with the estate.

Remember being named the executor of the estate can be overwhelming but with these tips and professionals in your corner, you can get the job done. The IRS will need to have paperwork filed stating that you are no longer the fiduciary for the estate.

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A Drop in the Mortgage Rates

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November saw the mortgage rates drop for five weeks in a row when reported. At the end of November, the 30-year fixed-rate dropped to 7.22% according to Freddie Mac.

“Market sentiment has significantly shifted over the last month, leading to a continued decline in mortgage rates,” said Sam Khater, Freddie Mac’s chief economist.

“The current trajectory of rates is an encouraging development for potential homebuyers, with purchase application activity recently rising to the same level as mid-September when rates were similar to today’s levels,” he said.

Freddie Mac states that the average mortgage rate is based on the mortgage applications received by Freddie Mac. They believe that the rate decline is due to the mortgage rate cycles peaking. These rates have been brought down by the Fed’s historic rate hikes that have been applied the past couple of years.

“While some Federal Reserve policymakers expressed growing confidence that the existing monetary policy is sufficiently restrictive to reduce inflation to the 2% target, others emphasized the potential necessity for additional rate hikes to achieve the target over a reasonable timeframe,” said Jiayi Xu, an economist at Realtor.com.

“The good news for prospective homebuyers is that affordability is expected to turn around in 2024, though at a slower pace, through a combination of lower mortgage rates and lower prices brought about by cooling inflation and a less frenzied housing market,” Xu said.

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The Ins and Outs of Loan Origination Fees

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A loan origination fee is a one-time, upfront charge for processing a personal loan. It can also be called a sign-up fee or an upfront fee. The fee amounts to a percentage of the loan amount’s total. For example, if you have a loan for $10,000 and your origination fee is 5%, then $500 will be taken from the total amount borrowed. So you will receive less money than the actual loan. Even though you get a check for $9,500, you will still have to pay back the $10,000.

Different lenders will charge different percentages of loan origination fees which usually range from 1% to 8%. A bigger loan means a bigger loan origination fee. When you borrow $15,000, different loan origination fees can affect the costs. For example, if your origination fee is 3% you will only get $14,550 of your loan. If you need to get $15,000, you will have to borrow $15,464. If your fee is 8%, then you would have to borrow $16,305.

So why do origination fees even exist? An origination fee is the way a lender earns money off of the mortgage. It will cover administrative fees, verification or credit checks, or other processing expenses. Luckily, there are personal loans that do not have origination fees. If you choose a loan without one, you will save money on the loan’s interest, lower the cost of the loan, and you can borrow the full amount without paying more fees.

You want the best deal, so you need to find a loan where you only pay interest on the loan. To do this, contact and shop around for a lender who is right for you.

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Refinancing a Land Loan

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When refinancing a land loan a person dislikes the costs associated with refinancing and this can cause a person to pause when thinking about refinancing. This is not always the case and so it is important to understand the ins and outs of refinancing a land loan.

“Most people who’ve had a house loan or residential mortgage loan are familiar with the substantial costs to refinance their loan when rates go down. That’s because, in most cases, when you refinance a residential mortgage loan, you have to get new title work done, a new mortgage, a new appraisal, sometimes new surveys, so you can be talking thousands of dollars in fees,” says Brandon Simpson of First South Farm Credit.

Many do not know that there are other options when it comes to refinancing. If you find a lender such as First South or Farm Credit System who will not only make the loans but service them as well, you can save. Since these mortgages will not be resold into the secondary mortgage market, you can benefit from the lower rates.

This is called repricing which means you only sign two or three documents. ”In most cases, we’re not having to order new appraisals and do all of the work associated with a refinance, so you’re likely to only spend hundreds of dollars in fees versus thousands. We can do that as many times as it makes financial sense for that borrower. For example, if a borrower in today’s market is paying 8.5%, and the rates drop to 7.5% or 7.0%, we can modify the note to the lower interest rate. And… if the rates continue to drop to maybe 6.0% or lower, we can modify the note again,” explains Simpson.

Remember not all lenders will offer repricing. You need to find a lender such as First South Farm Credit that offer note modifications.

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