How this calculator works
Vacant land is financed much like a house but with stricter terms. Lenders usually want a larger down payment, often 25% to 50% of the price, because undeveloped land is harder to sell quickly and may not have services. Terms are also shorter than mortgage amortizations, frequently 5 to 20 years. This calculator deducts the down payment, then amortises the remainder at the stated rate and frequency. Property tax, surveying, zoning and servicing costs are not included, and construction-to-permanent financing is a different product.
Formula
Down payment = land value × down payment percentage. Amount financed = land value - down payment. i = annual rate / payments per year; n = term in years × payments per year. Payment A = loan amount × i / (1 - (1 + i)^(-n)), or loan amount / n at a zero rate. Total interest = n × A - loan amount.
Worked example
A $250,000 lot with a 30% down payment needs $75,000 down and finances $175,000. At 8.5% over 15 years paid monthly, the payment is $1,723.29. The 180 payments total $310,192.96, so interest is $135,192.96 and the down payment and interest together nearly equal the loan itself.
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Frequently asked questions
Why is the down payment higher than for a home?
Land has no building to secure the loan, so a lender's recovery in a default depends on selling the lot alone. A larger equity cushion reduces that risk, and some lenders also limit loan-to-value by land type.
Can I build on the land later?
Building usually needs separate construction financing, then a mortgage once the home is complete. This calculator covers the land purchase only.
Are there extra costs?
Yes. Expect survey, appraisal, legal, zoning and servicing costs, and property tax once you own the land. None of these are in the payment shown.
Does a shorter term reduce cost?
A shorter term raises the payment but cuts total interest because the balance is repaid sooner. Compare both the payment and the total before choosing.