Question 1

What interest rate should I expect on a land loan?

Accepted Answer

Expect land loan rates to run 1–4 percentage points above a comparable home mortgage, depending on the lender type. Subsidized farm credit sits lowest, banks in the middle, hard money highest. Turnrow prices each loan per asset — above farm credit, below hard money — with a written term sheet in 24–48 hours.

Question 2

Why are land loan rates higher than home mortgage rates?

Accepted Answer

Land loans price higher because the collateral is harder to sell, there is no government-backed secondary market buying them, and default risk runs higher without a home the borrower lives in. Lenders carry these loans on their own books, so they price for illiquidity — typically 1–4 points over residential mortgages.

Question 3

What is LTV and how is it calculated on a land loan?

Accepted Answer

Loan-to-value (LTV) is your loan amount divided by the property's appraised value. A $700,000 loan on land appraised at $1,000,000 is 70% LTV. On purchases, lenders — Turnrow included — use the lesser of purchase price or appraisal, so a bargain purchase does not automatically unlock a bigger loan.

Question 4

Why do lenders cap land LTV at 70% or lower?

Accepted Answer

Land LTV caps at 65–70% because land is illiquid and its value can swing with commodity prices, water, and interest rates. The 30%-plus equity cushion covers a distressed sale discount, carrying costs, and legal expenses if a loan defaults. Houses get 80–97% LTV because they sell fast; land does not.

Question 5

What is an interest-only loan and when does it make sense on land?

Accepted Answer

An interest-only loan means your monthly payment covers interest alone — no principal — so the balance stays flat until payoff. On a $700,000 loan, that cuts the monthly payment meaningfully versus an amortizing note. It fits short holds: bridge situations, land you plan to improve and refinance, or seasonal-income operations.

Question 6

What is a balloon payment and is it risky?

Accepted Answer

A balloon payment is the remaining loan balance due in one lump sum at maturity — common on land loans amortized over 30 years but due in 12–36. It is risky only without an exit plan. If you know how the balloon gets paid — sale, refinance, or cash — it is simply the price of a lower payment now.

Question 7

My balloon is coming due and my bank won't renew. What now?

Accepted Answer

You have three moves: refinance with a different lender, sell before maturity, or negotiate a short extension while you do one of the first two. A private lender like Turnrow can issue a written term sheet in 24–48 hours and close in 2–4 weeks — usually fast enough to beat a maturity date if you start now.

Question 8

Can I pay off my land loan early? What is a step-down prepayment penalty?

Accepted Answer

Most private land loans allow early payoff, but many charge a prepayment penalty — often structured as a step-down, such as 3% of the balance in year one, 2% in year two, 1% in year three, then nothing. Turnrow uses flexible, step-down prepayment so an early exit costs less the longer you hold.

Question 9

How do quarterly or annual payment schedules work on ag loans?

Accepted Answer

Ag lenders often schedule payments quarterly, semi-annually, or annually — timed to harvest — instead of monthly. Interest accrues daily either way; you simply pay it in fewer, larger installments. A farmer who gets paid in November should not owe twelve payments a year, and good ag lenders structure around that.

Question 10

How much can I borrow against land I own free and clear?

Accepted Answer

Against debt-free land, you can typically borrow up to 70% of appraised value. Land worth $1,000,000 free and clear supports a loan up to $700,000, all of it cash in hand since there is no existing lien to pay off. Turnrow lends up to $1.5M this way with no tax returns or financials.

Question 11

What closing costs should I expect on a land loan?

Accepted Answer

Budget roughly 3–5% of the loan amount for land loan closing costs. The big line items: origination points (1–3%), appraisal ($2,000–$6,000-plus for ag properties), title insurance, escrow/closing fees, recording, and lender legal. On a $500,000 loan, expect $15,000–$25,000 all-in, often financeable within your LTV.

Question 12

What are origination points, and are they negotiable on a land loan?

Accepted Answer

One origination point equals 1% of the loan amount, paid to the lender at closing — $5,000 per point on a $500,000 loan. Private land loans typically carry 1–3 points. They are negotiable at the margins, usually by trading against rate: fewer points for a higher rate, or the reverse.

Question 13

Should I take a fixed or floating rate on a short-term land loan?

Accepted Answer

On a 12–36 month land loan, fixed is usually the right call. The premium for fixing a short-term rate is small, and a floating rate turns your largest expense into a variable you cannot control during exactly the window you need certainty. Floating only wins if rates fall meaningfully during your hold.

Question 14

How does a cash-out refinance on land work?

Accepted Answer

A cash-out refinance replaces your existing land loan with a larger one, and you keep the difference in cash at closing. On land appraised at $1,000,000 with a $300,000 payoff, a 70% LTV loan of $700,000 clears the old note and puts roughly $400,000 in your account, less closing costs.

Rates, LTV & Loan Structure