Deposit required on a land purchase

[young*investor]

Hi all!

Have been looking at purchasing a section of land for the future, and was wondering if there is a specific deposit amount normally required for bank lending, i.e. 20% of purchase price deposit compared to purchasing a normal dwelling?

Anyone able to help out???

Have searched the wiki but didn't find anything to help answer this question...

[roseneath_rat]

It will depend on the land, the borrower & the lender!

Assuming it is already zoned residential and close to a major centre I would expect a 20% deposit to be reasonable. The harder part comes when you try to build on it, as you may need to maintain an LVR of 80% through the entire project.

[SuperDad]

Bare land can sometimes require more equity from the purchaser - I recall it being 40% with a few banks when we looked back in 2000.

That was a while ago, though.

Paul.

[Green Fish]

For bare land, you might want to consider offering 20-30%, with a delayed settlement (of 12-18 months) with a limited right of entry in the period up to settlement.

The vendor get today's price, but has to wait to get the money. You pay a higher price than the market value in 18 months time, but you save 18 months worth of interest. And in the interim, you can make your plans, and obtain your resource consent.

[captaincrab]

1. If you want a delayed settlement for say 12-18 months then give the vendor a Deposit Bond for 10% and keep your cash.
2. If you wish to settle the land and intend to build a house within 12 months then 20% deposit should be doable
3. If you wish to settle the land and hold long term without building then most Banks will require 50% deposit. Some may do it for less though.

If you want to build there are Banks who will fund construction through progress payments drawn down on your loan facility. Pioneer used to do it on 10% deposit. Theres a fair bit of preparation in terms of costings,plans,building contracts, valuers etc but its possible and generally a good way to create equity.

[Green Fish]

In Rodney District, there are many vendors of bare land who are concerned about the market. They will sell at today's price and wait for the money, as long as they have some assurance that they will get the money. So it's all about the size of the deposit.