There are three major types of financial transactions that can sometimes be complicated when dealing with banks. They are: loans on the land, mortgages on the land, and mortgages on rural property. They are complicated because banks often avoid granting them due to the perceived risk.
Here is a review of each and the reasons why banks are reluctant to lend in each situation:
Loans in the field (or lines of credit)
Banks are leery about this type of loan because of the risk in the event that the borrower can not repay their loan. The lenders can provide the applicant with one or more lines of credit and the borrower can provide the land as collateral for each. Problems can arise when the borrower can not repay the loan and the bank is forced to foreclose and take the land to resell it. But, if the land is in a remote location that is difficult, where the market is weak and the property is difficult to sell, the bank may not get its money or have to wait for a lake period for the transaction to take place. This agreement is very similar to a credit on the net value of the home, only that it is based on the land only, which is often more difficult to sell than a property with some type of residential or commercial structure built on it.
Mortgages on the ground
This is a type of mortgage loan that is often used a lot to buy land or a lot. The focus is again on the ground, not on what is on the ground. That is one of the problems that banks have with respect to mortgages on the ground. The investment is only made on the site. Banks consider the land itself as a less secure investment than a land with a house or a farm in it (unless the location is fantastic). If the owner can not pay the debt, then the land has to be resold, rented, or something must be built on that increases its value, leaving the bank with only a piece of land to sell if it wants to foreclose. If you CAN get a bank that gives you a mortgage on the ground, they usually require a larger down payment than a normal mortgage. This is so that the buyer has a higher net worth on the land and the bank does not have to risk so much advancing capital.
Mortgages on rural properties
These are mortgages assumed by credit institutions that focus on properties normally located outside the urban area, and in areas of rural urbanization. These loans are considered among the most risky by banks due to a number of factors. One is that many of the mortgages do not require much net worth advanced by the borrower. This means that the owner of the property does not have to offer much of the down payment so that most of the financial transaction falls on the bank.
Second, if something happens and the buyer can not return the loan or the mortgage is invalidated, it is much more difficult to resell the property, since it is usually in a remote place. Loans on rural developments are generally conceived in terms of what the future value will be, rather than how much the property is worth at the present time. In other words, if you can not make your payments, it is possible that the agreement may be to seize future wages or income to recover the cost of the loan. This happens because the bank thinks that it will seldom be able to resell the property in a profitable way or at an opportune time in a short sale or auction in the same way that they can usually do with more urban areas.
These are the three major types of mortgages that banks avoid. Let’s admit it. Banks do not like risk, and these three categories represent more risk to them due to the fact that these types of properties are much more difficult to resell, if the borrower fails to fulfill the loan.
So, what is the solution for you, if you need this type of mortgage? Do not accept unrealistic clauses that can complicate your future even more! Some banks charge extremely high fees just for processing your request! Do not tolerate this. Instead, consider a private entity specialized in the mortgage business.
About private entities specialized in the mortgage business
Private entities specialized in the mortgage business are not like banks. They can decide as they act how much risk they want to take. They are not under the same excessively structured regulations as a normal bank, nor do they need to ask for unrealistic advances on net worth if they do not want to. They have the freedom to choose what they want to do, based on your ability to pay, and other factors. They can negotiate with you to decide what you can reasonably afford and reach an agreement that is good for both parties.
If you have been in the banks and have been denied, and you need a loan on the land, a mortgage on the land, or a mortgage on rural property in Mexico, contact us. Tell us about your situation. We have faith that you will do what you say. We will say “Yes” when others turn their backs on you.