You own land free and clear. It just sits there while you pay the taxes. Meanwhile you have a deal you want to buy and no cash for it. Can you get a loan against the land you own?
A question I hear from land investors goes like this: "Eric, I paid cash for 40 acres a couple of years ago. It is worth more now, and I found another deal. The land has no loan on it. Can I borrow against it?"
Yes. Banks call it a land equity loan. Investors call it a cash out refinance. Most guides online answer the question for a house, or send you to a bank with a credit check, an appraisal, and a month or two to close. That does not help an investor with a closing date in two weeks. Here is how it works with a private lender, with the same math I use on every loan.
Can I get a loan against land I own?
Yes. A land equity loan lets you borrow against vacant land you already own.
The land is the collateral. The lender records a mortgage or deed of trust on it and lends you cash. Few banks make these loans on raw land, so most come from private lenders. We make land equity loans for business purposes, $30K to $1M, with no appraisal, closing in as little as 7 days. With free and clear land there is no old loan to pay off, so the whole loan comes to you as cash.
The takeaway: land you own free and clear is not a dead end. It is collateral you can put to work.
Own land free and clear?
Borrow against it: 50% of the lower of value or what you paid, $30K to $1M, 7 day close.
See Land Equity LoansGet a Free QuoteHow much can I borrow against my land?
With us, up to 50% of the lower of the land's value or what you paid.
We look at two numbers: our valuation of the land today and the price you paid. We take the lower one and lend half of it. Loans run $30,000 to $1 million, so the lower number has to be at least $60,000 to reach our minimum. Here is how it plays out on four parcels.
| You paid | Our value today | Lower number | Cash out loan (50%) |
|---|---|---|---|
| $120,000 | $180,000 | $120,000 | $60,000 |
| $250,000 | $300,000 | $250,000 | $125,000 |
| $200,000 | $150,000 | $150,000 | $75,000 |
| $50,000 | $110,000 | $50,000 | $25,000 (below our $30,000 minimum) |
Notice the last row. The land more than doubled, but the loan is still based on the $50,000 you paid. If there is already a loan on the land, we pay it off at closing and you get what is left.
Rule of thumb: take half of what you paid. If the land is worth less than you paid, take half of the value. You can figure your loan on a napkin before you ever call a lender, or pick Cash out refinance in the instant land loan quote.
Why does the lender use what I paid and not just the value?
Because a price someone actually paid is hard evidence, and a higher value nobody has paid yet is still an opinion.
When you bought the land, a buyer and a seller agreed on a number and money changed hands. That is the best proof of value a lender can get. A higher value may be real, but until a buyer pays it, it is a guess. On a cash out, the money leaves the land and goes into your next deal, so the land itself has to cover the loan if things go wrong. Lending half of the lower number leaves a wide cushion for both of us.
Banks are cautious here too. Landmodo says lenders typically allow 50 to 65% of appraised value on raw land.
The takeaway: equity on paper is not equity in the bank until a buyer pays for it. If you want to borrow against a higher value, the way to prove it is to sell part of the land or wait for comparable sales.
What does a land equity loan cost?
14% at $100K and up, 16% under, interest only, same terms as our purchase loans.
There is a $600 doc fee, a 2% exit fee at payoff, $25 a month servicing, and 5 months of minimum interest. No points at closing, and nothing is paid before closing. Because of the 5 month minimum, price the loan in total dollars for the time you really expect to hold it. Here is the $60,000 loan from the first row of the table above, held 12 months.
| Cost | Our term | $60,000 loan held 12 months |
|---|---|---|
| Interest | 16% under $100K, interest only | $800 a month, $9,600 |
| Minimum interest | 5 months | Already met at 12 months |
| Exit fee | 2% of the loan at payoff | $1,200 |
| Doc fee | $600 flat | $600 |
| Servicing | $25 a month | $300 |
| Total | $11,700 |
Is $11,700 a lot to borrow $60,000 for a year? Compared to a bank, yes. But if that $60,000 is the down payment on a flip that clears $40,000, the loan paid for itself. If you have no plan for the money yet, I would skip the loan. Run your own numbers on the land loan calculator.
Rule of thumb: only pull cash out when you already know which deal it is going into.
How is a private lender cash out different from a bank land equity loan?
A bank usually lends longer and cheaper but slower, with an appraisal and a credit and income review. A private lender like us lends shorter and costs more, but closes in as little as 7 days.
Most top search results describe the bank version. LendingTree puts the maximum at 50 to 85% of value, says most lenders cap debt to income at 40% or less, and gives typical terms of 10 to 12 years. Landmodo quotes credit scores of about 620 to 680 and 30 to 60 days from application to closing. Here is how the two compare.
| Bank land equity loan | Damen cash out | |
|---|---|---|
| How much | 50 to 85% of value (LendingTree); 50 to 65% on raw land (Landmodo) | 50% of the lower of value or what you paid |
| Valuation | Paid appraisal | Our valuation from comparable sales, no appraisal |
| Borrower review | Credit score, income, debt to income | The land, the plan, and a personal guaranty |
| Payments | Usually amortizing | Interest only |
| Term | About 10 to 12 years | 2 years, extensions offered |
| Time to close | 30 to 60 days | As little as 7 days |
| Best for | Long holds, borrowers with strong income | Investors who need cash fast for the next deal |
Holding the land ten years and in no hurry? Call your local bank first. Need the money this month? A bank timeline can cost you the deal. The takeaway: pick the lender by your timeline and your exit, not just the rate.
What can I use the cash for?
Your land business only.
Buy the next parcel, fund a down payment, pay out a partner, or cover survey and platting costs on another project. The loan is for business purposes, so the land must be owned by an entity and the cash cannot go to a home, a car, or other personal use. See land loans for an LLC.
Is cross collateral better than a land equity loan?
If the cash is for a down payment on more land, usually yes.
With cross collateral, you pledge the land you own as extra collateral on a new purchase, and we can fund up to 100% of the new price. You borrow once instead of twice. Rule of thumb: cash out for cash needs, cross collateral for your next purchase.
What land qualifies for a land equity loan?
Vacant land, 2 acres or more, with legal access and real comparable sales.
The land cannot sit mostly in wetlands or a flood zone, and it has to be in a state we lend in. We do not lend in CA, AZ, NV, NY, NJ, ND, SD, MT, HI, or VT. If a balloon payment is coming due and you only need to pay it off, see land balloon refinance.
How does a cash out refinance on land work, step by step?
You run your numbers, apply, we value the land and send written terms, title is cleared, your company signs, and the title company wires your cash.
- Run your numbers in the instant quote (pick Cash out refinance).
- Apply with the address, acreage, what you paid, and when you bought it.
- We value the land from comparable sales and send a written quote within 24 hours.
- Order title right away. Old liens and name mismatches cause most delays.
- Your LLC or corporation signs the loan documents, and you sign a personal guaranty.
- The title company or closing attorney records our first lien and sends you the loan amount minus closing costs. You pay nothing before closing.
- You make interest only payments starting 30 days after closing. When you sell or refinance, the loan is paid off, including the exit fee.
Rule of thumb: have the closing statement from when you bought the land ready on day one. It proves what you paid.
What gets a land cash out turned down?
Personal use, a state we do not lend in, a parcel under 2 acres, or a loan that comes out under $30,000.
- The land is in a state we do not lend in.
- The parcel is under 2 acres, has no legal access, or sits mostly in wetlands or a flood zone.
- Half of the lower of value or price comes out under $30,000.
- The money is for personal use, or the land is owned by you personally instead of a company.
- An existing loan on the land is bigger than our loan, so it cannot be paid off at closing.
The takeaway: if the land qualifies and the money is going into another deal, a cash out is one of the simplest loans we make.
Frequently Asked Questions
Can I get a loan against land I own?
Yes. A land equity loan lets you borrow against vacant land you already own. Damen Capital lends $30K to $1M for business purposes and can close in as little as 7 days.
How much can I borrow against my land?
Up to 50% of the lower of the land value or what you paid. If you paid $150,000 and it is worth $200,000, the loan is up to $75,000.
What is the difference between a land equity loan and a cash out refinance?
None in practice. Both are loans against land you already own that put cash in your hands.
Can I use a land equity loan for personal expenses?
No. Our land equity loans are for business purposes only, to entities that own the land.
Do I need an appraisal for a land cash out refinance?
Not with us. We value the land from comparable sales, so there is no appraisal. That is a big reason we can close in as little as 7 days.
Can I cash out land that still has a loan on it?
Yes, if our loan is big enough to pay it off. Our loan must be in first position, so the existing loan is paid off at closing and you get what is left.
Is there a prepayment penalty on a land cash out loan?
There is a 5 month minimum of interest and a 2% exit fee at payoff. After 5 months, paying early simply stops the interest.