Land Loan Calculator

A land loan is a mortgage used to purchase undeveloped or raw land — not a home or commercial building. Lenders treat land loans as higher-risk than traditional mortgages because land alone generates no income and is harder to sell in a foreclosure, resulting in stricter terms.

Monthly Payment Formula (same as standard amortization): M = P × [r(1+r)^n] ÷ [(1+r)^n − 1]

Total Interest Paid = (M × n) − P

What each variable means:

• M: monthly payment amount
• P: principal loan amount (land purchase price minus down payment)
• r: monthly interest rate = Annual Rate ÷ 12 (expressed as decimal)
• n: total number of monthly payments = Loan Term in Years × 12

How land loans differ from home mortgages:

• Higher interest rates: typically 1–3% above conventional mortgage rates
• Larger down payment required: usually 20–50% (vs. 3–20% for homes)
• Shorter loan terms: commonly 10–20 years (vs. 30 years for homes)
• Stricter income/credit requirements: lenders offset higher risk with tighter underwriting

Land loan types:

• Raw land loan: unimproved land with no utilities or road access. Hardest to finance, highest rates.
• Unimproved land loan: has some infrastructure (utilities nearby) but no structures.
• Improved land loan: platted lots with utilities, roads, and permits. Easiest to finance, closest to residential rates.

Worked example: You purchase a 5-acre rural lot for $120,000. You put 30% down ($36,000) and finance $84,000 at 8.5% for 15 years.

r = 8.5% ÷ 12 = 0.7083% = 0.007083 n = 15 × 12 = 180 payments

M = 84,000 × [0.007083 × (1.007083)^180] ÷ [(1.007083)^180 − 1] (1.007083)^180 ≈ 3.5054 M = 84,000 × [0.007083 × 3.5054] ÷ [3.5054 − 1] M = 84,000 × 0.02484 ÷ 2.5054 M = 84,000 × 0.009913 = $832.71/month

Total paid = $832.71 × 180 = $149,888 Total interest = $149,888 − $84,000 = $65,888

Tip: If you plan to build within 1–2 years, ask lenders about a construction-to-permanent loan that combines land purchase and construction financing into one closing.