Lenders take a conservative approach when processing vacant land loans due to the inherent risks associated with buying land.

Land prices tend to fluctuate more rapidly than house prices.

Furthermore, if a borrower defaults on the land loan, then it’s more difficult to sell a vacant land than an established home.

Therefore, it should not come as a surprise that the maximum loan to value ratio (LVR) for a vacant land loan with bad credit is limited.

We have lenders on our panel who can help you get a vacant land loan, even with bad credit.

How much can I borrow?

The maximum LVR (loan to value ratio) you can borrow is 80% of the property value, but it depends on many factors such as land size, post code etc.

For land sizes up to 10.1 ha, generally you can borrow up to 80% of the land value. For bigger land sizes, the LVR is restricted to 70%.

In addition, there are some postcode restrictions on the location of the property.

You can use our postcode calculator to find out if the location of the vacant land is accepted or not.

What type of bad credits are accepted?

Bad credit vacant land lenders on our panel accept the following scenarios for bad credit:

• Some of the major banks on our panel will ignore minor defaults of less than $1,000, so you can apply for a standard vacant land loan.
• One lender on our panel will also accept one-month mortgage arrears.
• A few non-conforming lender on our panel will accept registered defaults, judgements, writs or write offs of less than $3,000 for investment purpose and less than $5,000 for owner-occupied land.
• A couple of our specialist lenders will consider an unlimited number of defaults, whether they are paid or unpaid, if 24 months have passed since the listing.
• One day discharged bankrupt.

How soon do I have to build?

Getting vacant land is the best option if you do not have funds to build your home now, but you do not want someone else buying the lot.

You do not have to build a home on the vacant land immediately, however, if you do not have specific plans to build soon, then you’d be considered a high-risk borrower because land investment is considered speculative investing.

Vacant and undeveloped land does not generate any income and the potential capital gain you’ll get from buying vacant land hinges on whether the land will increase in value in the future.

The increase in the value of the land depends on many external factors like rezoning of land, handing it over to developers, renting the land for car parks or farming purposes, etc.

If you have an intention to build a property on the land, then you are viewed as a lower-risk borrower.

Is the interest rate higher?

Since you are applying for a vacant land loan with bad credit, you’re most likely applying with non-conforming lenders as such they charge higher interest rates due to the higher risk profile.

The interest rates might be slightly higher if you’re applying for an investment land loan compared to a residential land loan.

The idea is to refinance to a lower interest rate once your credit file clears up.

How do I prove my income?

For PAYG applicants:

• Last 2 payslips
• Employer letter OR latest group certificate

For self-employed applicants:

• Last 2 years tax returns and 2 years tax assessment notices. We have a lender on our panel who will also accept a 1-year tax return.
• 6 months bank statement
• Last 2 BAS (Business Activity Statements)

Are low doc options available?

Yes, there are low doc options available if you’re looking to buy vacant land.

A low doc with bad credit might be a tougher loan to get approved, but if there is a viable reason for your credit impairment, then our mortgage brokers can make a stronger argument in your favour for a vacant land loan approval.

The max LVR for a low doc with bad credit vacant land loan will be reduced on a case by case basis.

Is there a maximum and minimum amount I can borrow?

The maximum amount you can borrow differs according to land size, property location, etc. but it can go up to $2.5 million.

The minimum loan amount for a bad credit vacant land with our lenders are between $50,000 and $100,000.

How to increase my chances of getting land loan approved?

Lenders will look into the same criteria when assessing your land loan like any other home loan.

However, there are ways you can increase your chances of getting your land loan approved.

• Get started on improving your credit score.
• Cancel all unused credit cards as it affects your borrowing power.
• Try to increase the size of your deposit as the LVR is restricted to 80%.
• If there are any new debts on your credit file, pay them off first as this shows the lender that you are serious about improving your credit score.

Frequently Asked Questions (FAQs)

How long is the loan term?

Usually, a vacant land loan term can be up to 30 years.

Interestingly, we have a lender on our panel who’s offering a loan term of 40 years for vacant land loans.

What other factors will lenders consider for a land loan?

Besides the land size and the location, here are other factors that lenders look into for a vacant land loan:

• If there is direct access to all-weather roads that are maintained well.
• If the land is located near amenities like electricity grid, sewer drains, etc.
• If the land is zoned as a rural, commercial, farm, etc.
• If the land will be used for residential or commercial purposes (farming land, etc.). Lenders will also consider hobby farms as well.
• If you have an intention to build a property on the land, then you are viewed as lower risk.

Find out if qualify for a bad credit land loan

The options of getting a vacant land loan approved with bad credit are limited due to strict lending criteria.

However, if you can show a credible history of managing your debts then your chances of getting a bad credit land loan approved are higher.

Fortunately, if you know where to look and who to contact, then even within those limited options, you can find a land loan that is suitable for you.

Getting approval for a vacant land loan with bad credit can even help you improve your credit score, if you can make timely repayments on it.

Our mortgage brokers are credit experts who can get your loan approved.

Call us on 1300 889 743 or fill in our free assessment form to get in touch with our award-winning mortgage brokers.