How to take a loan against the security of a land plot

A loan secured by a land plot is a flexible financial instrument that allows you to solve the problems faced by the owner of real estate. By encumbering the object, the borrower will increase the available limit and increase the bank’s loyalty. He will more willingly approve a request for lending, lend money at a lower interest rate, increase the terms of cooperation. However, the offer differs from other types of loans. It is important to take into account its features before applying.

Types of loans

Banks issue targeted and non-targeted loans against the security of a land plot. In the first case, funds are provided for a specific purpose:

• construction of a residential house;
• purchase of new real estate, for example, an apartment (mortgage);
• other purposes.

The expenditure of funds needs to be confirmed. For example, if the borrower borrows money for the construction of a house, the bank will disburse only part of the amount. The second transfer of funds is made after the client reports on compliance with the targeted expenditure of funds. For this purpose, checks, other evidence are provided. If a mortgage is issued, the bank itself will transfer funds to the seller. They are not provided to the hands of the buyer. The borrower must comply with the insurance requirement. A policy protecting the property must be taken out for the entire period of mortgage lending.

Requirements for pledged property

It will be possible to obtain a loan against the pledge of the plot, if the borrower owns property that meets the requirements of the bank. The land must be liquid. This means that the object is of interest to buyers, has economic potential. For example, real estate in Lyubertsy, the bank will take as collateral more willingly than a plot in a remote regional village.

Banks usually accept the following types of plots as collateral:

• agricultural land;
• for individual housing construction;
• intended for homestead farming.

The object must be legally clean. If there are disputes regarding the land, legal proceedings, the bank will refuse to accept the plot as collateral. So the company protects itself from possible difficulties.

The borrower must be the sole owner of the plot. It is impossible to pledge someone else’s property, even if its owner consents to the imposition of an encumbrance. All buildings on the plot must be registered in accordance with the provisions of the law and belong to the owner of the land. The bank pays attention to the survey. It must be completed and data about the object must be entered in the boundary and cadastral plans.

Not all sites are eligible for a loan. The bank will not accept land if the site:

• is already under any type of encumbrance;
• is located on the territory of a closed territorial entity;
• is part of a protected area;
• is the object of territorial claims from neighbors.

The property is thoroughly checked. If the bank reveals the fact of deception, it will refuse to continue cooperation.

What documents should the borrower have?

To go through the registration procedure, the borrower must provide a package of documents for himself and the land plot. The basic set has the following form:

• documents of title (contract of sale, purchase and sale, gift, certificate of entry into inheritance);
• confirmation of the existence of rights to the plot (certificate of ownership or extract from the USRN);
• cadastral plan of the site;
• a certificate confirming the fact that there are no debts for public utilities.

If there are buildings on the plot, a similar set of documents should be submitted for them. Unregistered structures are not taken into account when assessing the total value of the object. It is important for determining the amount the lender is willing to lend.

As a confirmation of the connection with the object, the borrower provides his documents. Needed:

• passport;
• additional identification (driver’s license, passport, SNILS, INN, military ID);
• a copy of the labor book;
• a certificate of income.

The exact list depends on the internal policy of the financial organization. Some companies are ready to reduce the list and approve the application on 2 documents. However, if possible, it is better to provide the entire list. So the client will confirm the reliability, compliance with the requirements and can count on loyal credit terms.

Who performs land valuation?

Usually the bank has partnership arrangements with several real estate appraisal companies. The financial organization will provide the borrower with a list. He will be able to study the list and turn to one of the appraisers. It is not always possible to engage your own specialist. Usually lenders do not take into account the conclusions prepared by third-party experts, even if they work with all the requirements of the legislation.

How much can I count on?

The size of the available limit on the offer depends on the value of the land plot. It is determined individually based on the results of the assessment. Banks are ready to give up to 70% of the value of the object. They also take into account:

• credit history;
• income of the borrower;
• the amount of outstanding liabilities, if any;
• the presence of other expensive property.

Thus, a loan secured by real estate allows you to solve financial problems or implement projects that require a large amount of funds. The service is characterized by a reduced rate and increased limits. The bank is ready to issue money for more than a year. Usually they give 5-10 years for repayment. However, it is important to assess your strength and calculate the monthly financial burden. You can determine the approximate amount online using a loan calculator.