Land loan refinance can unlock significant savings on your future payments. At Private Capital Investors, we can help you explore this loan option. Depending on your loan details and creditworthiness, refinancing could allow you to pay off your loan faster and potentially save thousands in interest or lower your monthly payments by extending the loan term (though you’ll pay more interest overall).
At Private Capital Investors, we can help you explore this loan option so you can decide if it’s right for you. We can also explore strategies like re-amortization and repricing to help you understand how they might benefit you.
Refinancing strategies
Land loan refinance involves replacing your current loan with a new one, potentially with lower interest rates. There are two refinancing strategies, each with different outcomes:
- Re-amortization adjusts the number of years you have to repay the loan. This can lower your monthly payment but will extend the total loan term.
- Repricing involves negotiating a lower interest rate with your current lender. Depending on your goals, this can decrease your monthly payment or allow you to pay off the loan faster. You can choose to keep the same loan term and pay less each month or keep the same monthly payment and pay off the loan sooner.
Remember that when considering refinancing options, it’s essential to take the time to compare the new loan’s terms — particularly the interest rate and repayment period — to your current loan. Do the math to determine if the new payment fits your cash flow expectations.
Comparing term length and rates
Let’s assume you have a $500,000 loan amount with a 4.5% interest rate and ten years remaining to pay it off. In this scenario, you would be paying $63,384 every year. However, refinancing to a lower interest rate of 4.0% could reduce yearly payments to $61,816.
Alternatively, you can further reduce the annual payment and improve your cash flow at the same time by stretching the loan over 15, 20, or 25 years. This can significantly reduce your yearly payment and free up more cash that you can use for other investments. However, a longer loan term typically comes with a higher interest rate. So, while this improves your cash flow in the short term, the total interest you have to pay over the life of the loan will increase compared to a shorter term with a lower rate.
Cash rent equivalent
Land loan refinance can influence your land’s cash rent equivalent (CRE). CRE refers to the annual expenses associated with owning the land, divided by the total acreage. These expenses typically include your real estate taxes and loan payments.
By refinancing your land loan, you can lower your CRE. If you secure a lower interest rate through refinancing, your loan payment could decrease. This would lead to a lower CRE, potentially making your land more attractive for renting and increasing its overall value.
Refinancing your land loan can also free up cash flow for other investments. Because you pay less monthly, you can use the extra cash to improve the land or invest in other income-generating opportunities.
Taking the previous example, let’s examine the impact of various loan durations on cash flow.
Let’s say you want to use $500,000 to finance 160 acres, with annual property taxes totaling $3,500. The CRE is calculated by adding the principal and interest payments to the taxes and dividing them by the number of tillable acres. For instance, on a $500,000 loan over ten years at a 4.0% interest rate, the CRE would be calculated as $61,816 (principal and interest) plus $3,500 (taxes) divided by 160 acres, resulting in $408 per acre.
As the loan term increases, both the interest rate and the annual payments decrease: a 15-year term at 4.3% interest has yearly payments of $46,109 and a CRE of $310 per acre; a 20-year term at 4.5% interest has annual payments of $38,647 and a CRE of $263 per acre; and a 25-year term at 4.75% interest leads to yearly payments of $34,825, with the lowest CRE of $240 per acre. (In all scenarios, annual taxes remain constant at $3,500).
Other considerations
Aside from assessing your refinancing strategies, calculating the CRE, and comparing term length and rates, consider asking the following questions to prospective lenders when considering a land loan refinance solution:
- How much will a land loan refinance cost me? Will it be cheaper to finance a new loan?
- Do you have an origination fee? If so, how much will it depend on the loan size?
- Are there prepayment penalties if I pay down or pay off the loan early? If so, how do you calculate it?
- How do you handle loan servicing options like partial release, access to re-borrow land equity loan assumption, and collateral substitution? How much are they?
- Are you willing to reduce the rate if the rates decrease?
- Can you finance additional loans with the same mortgage filed on my existing collateral? If you can, how much is it?
If you’re on the fence about refinancing your land loan, step back and evaluate your current loan’s terms, penalties, and interest rates. Are you unhappy with them? Then, it might make sense to refinance.
Our solution
Here at Private Capital Investors, our land loan refinance solution offers several key benefits:
- No prepayment penalties on the 30-year amortization
- Qualify for loan amounts from $3 million to $50 million
- Maximum loan-to-value of 70%
- At least two weeks (14 days) closing
- Nationwide lending
- Flexible and adjustable rates
We offer the following types of land and farmland loan refinancing:
- Cattle loans
- Alternate agricultural loans
- Hobby farm loans
- Vacant land
- Agriculture operation loan
- Citrus loans
- Orchard loans
- Rural land
- Poultry farm loans
Why choose us?
At Private Capital Investors, we are more flexible with our land loan refinance programs and are committed to finding the ideal solution for your requirements and property. You can count on our experts to guide you through the options and features available, assisting you in comparing different products to ensure you make a well-informed decision.
Tell us what you need, and we’ll provide the right land loan refinance solution to help you save money and maximize your assets.
We can help you secure the loan refinancing solution in different states and cities, including Phoenix, Denver, Miami, Texas, and Massachusetts.
Call 972-865-6206 or ask for a quote via info@privatecapitalinvestors.com.
