What to Consider Before Mortgaging Land


Many people are happy to purchase a well-established property with a home that has served many families’ needs well in the years before. You can move in, enjoy the fruits of someone else’s labor, and live quite happily. 

However, some people want to start their own property journey from scratch by purchasing bare land, shaping it how they want, and building their dream home. While building your own home and establishing the surrounding land can be rewarding, there can be a lot to consider. Don’t sign on the dotted line without considering the following information. 

Your Financing Options

Whether you plan to purchase farm land in Hawaii or another part of the country, your financing options should be the first thing you consider. If you’re going to need a mortgage to fund your land purchase and the construction of your home, find out what’s available to meet your needs. 

A land mortgage or loan can be more complex with a stricter set of requirements than a loan you obtain for an already established home. Sometimes, lenders require you to survey the boundaries, learn about any land use restrictions, and check zoning. They often also consider public roads and your access to utilities like electricity, sewage services, and water. 

Depending on where you buy and the type of land you plan to buy, you might qualify for a U.S. Department of Agriculture (USDA) subsidized loan. However, there are many other financing options at your disposal, such as: 

  • SBA loan

  • Personal loan

  • Government land loan program, such as an FHA construction loan

  • Home equity lines of credit (HELOC)

  • Home equity loan   

Land Size

You might have dreams of building your own home on a plot of land with enough space for your children and pets to play to their heart’s content. You might even wish to have enough room for a few livestock to sustain your lifestyle. 

Consider how much land you’d like to purchase early in the land-searching process. Often, the lot size can determine your mortgage options and the serviceability of your loan. According to the National Association of Home Builders, the median lot size for a detached family home is 8,177 square feet, while the average farm size is 445 acres, according to the USDA. While a larger lot can require much more work than a smaller one, there can be several advantages associated with more land, such as: 


You generally benefit from fewer neighbors if you purchase a large lot in the countryside. Any neighbors you do have are typically positioned further away from your home than those in a built-up city. 

Room for Children and Pets

A larger property typically means more space for family activities, children, and pets. If you’re building your dream home on a section, you also get to choose where on the lot it’s built for maximum enjoyment. 

Income Potential

While larger plots of land do often require more effort, there can also be income potential. You can grow vegetables to sell, plant fruit trees to profit from and raise livestock to feed your family or sell. You don’t typically have the same opportunities when purchasing small plots. 

Access to Utilities

When you start exploring your land funding options, utilities access is something many lenders want to know about. You might also be curious about what you’re able to access. If power companies haven’t installed power poles near your property, you might need to factor the cost of new poles into your budget. Alternatively, you might like to explore your alternative energy options, such as solar or wind-powered off-grid systems. 

Drinking water and sewage can also be crucial factors in the decision-making process. You might need to install a septic system as some isolated properties don’t have access to municipal sewage systems. If you can’t get fresh water delivered to your section via the municipal water system, an off-grid water system with a well and submersible pump might be your only option. 

Road Access

If you have your heart set on a remote property far removed from the hustle and bustle of city life, road access can be worth considering before placing your offer on a piece of land. Some roads are maintained for you by local bodies, while others must be looked after by those who own properties in the area. If you must maintain the road or trail leading from your property, you might need to invest in basic roading equipment to ensure it’s in excellent condition year-round. 

Internet and Cellphone Services

Before remote working was commonplace, workers had to purchase or rent homes close to their places of business to enjoy a shorter commute. However, even when factoring in work locations while house hunting, people are still traveling an average of 27.6 minutes to get to and from work. 

For many people, remote working has made that less of a priority. Many workers now have the freedom to buy their dream homes in their most preferred location because they’re able to work from home. 

However, before buying an isolated piece of land and building a new home, consider whether it will have reliable internet and cellphone services. Research cell phone and internet providers in that area and take note of signal strength when visiting the property in person. Fortunately, even if you can’t access the most common services, you might be able to take advantage of satellite internet for rural dwellers. 

Property Taxes

Property taxes can be expensive, with many Americans parting with several thousand dollars each year to fund local services and amenities like roads and education. When purchasing land, it’s important to realize that the initial property taxes you pay for that land will likely not remain the same once you’ve built your home. Keep this in mind when setting your home expenses budget. 

If you’re unsure what you can expect to pay once you’ve built your home, talk to locals in the area. You might also be able to find property tax information online from your local municipality. 

Requesting a mortgage or finance from your local bank or lending institute for land can be a significant decision to make, especially when you plan to build your dream home. However, if you’re thorough in your research and don’t rush the decision-making process, you might improve your chances of finding the perfect lot to suit your needs now and into the future. 

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