For those that do, who have you financed through? What were the basic terms (ie down payment, loan period,...etc.). Have you ever pre-sold existing lumber to provide down payment? Curious if the experts here can help me start a plan to own my own piece of Alabama some day.

You can't sell timber you don't own. You might be able to talk to a timber buyer, get him to cruise the timber and give you a price he would pay for the timber after closing. Alabama Land Credit among others loan money for land purchases.

I would think most lenders would be comfortable with 20% down.
I don't see why you couldn't pre-sell the timber contingent on closing. Probably not a bad strategy if you are cash strapped. May make the lender nervous.

I'm about to close in a few weeks on some land. If your credit is real good you might get by with 15% down. If not goes up from there. The other thing to consider is that you need around 2k to 2.5k for closing. 1k is to join the credit union and when you pay off the land you will get the 1k back.

The way around the closing price is to get the seller to raise the price of the land to cover the closing price. This is what I done. Good luck on the land.

When I had my land, I had to ask my lender if I could cut the timber. There was no timber contingent in my loan that prevented me from doing it so I cut 30 acres. Some lenders won't let you cut the timber because they technically own it since they own the note. Or if you do, they require you to pay down the note with any proceeds from the timber sale. Make sure you clear that up before you close or before you cut.

Dr. B

IF you have enough equity in your home to cover the land purchase, consider a HELOC or other loan against your home. Land and Timber would be unencumbered by a loan, and timber sale would be non-issue, with proceeds applied to loan balance. Interest rate should be much less on home vs land loan. Interest would be tax deductible on home loan, whereas land loan would typically not be.

Consult a qualified Tax Accountant who can give you accurate advise based on YOUR complete financial situation. Discuss your plans with your banker, if you have one that is able to make local decisions and will be in position to work with your needs. Also, do all the financial research / planning before you find your desired piece of property, see what your borrowing limits are, and what your household budget will allow.

First south farm credit, you can put 20% down. 15 yr fixed 5.5 no balloon payment at the end. If you own land as long as the tax valve is equal to or greater than the down payment you can use it instead of cash. Once you pay the loan down they will release the property being used as collateral. I'm going through it right now on a 77 acre tract I'm looking to buy. I'm using a small tract I own as the down payment instead of cash. If you have any questions just pm me

What credit union did you find 15% at ? I like to know things like that just in case another opportunity comes up down the road. Everywhere I called has been 20-30% down. As of last week my credit score is a 790 so that's not an issue. You're closing cost are a lot higher than mine are going to be though.

First south farm credit. If you call they will all tell you at least 20%. But if you go talk to them you can get 15%. I use the one in oxford.

Thanks a lot for the info, I wonder if you can negotiate rate?

When I did this they would only loan money on raw land and payed a small dividend at the end of the year.

I've bought and sold several farms over the years. 15% down is pretty standard, but like the interest rate, it depends on your financial situation.

I would never allow a lender to put any type of contingency on my timber and I would never borrow against my home to buy land. That's just me.

May I ask why not? I had thought about doing that at one time.

Because life isn't perfect. Lose your job, fall off a ladder stand and all the fun and games are over and they come for your house.

I'd never do that either, ever.

Because I would not want to leverage my personal residence to finance recreational land. Losing a tract of land is one thing, losing your home is entirely different. The slight difference in interest rate is not enough to justify the additional risk to me. That being said, I know some that have done it and have had no problems whatsoever.

Looks like Remington and I posted at the same time!

Gotcha....the reason I was wanting to do it was to use home equity for the 20% down payment I was looking for.

Please don't do that Casey. Like others said you just never know. I've seen farmers and others do this and when the bank comes calling it's not good for anybody.

If your in a home you plan to live in the rest of your life and/or you have some equity, I see no problem at all borrowing against your home. Unless it makes your home payment go up beyond your means. 1000.00 house note is a 1000.00 house note, no matter what it's tied to it.

Let me put it to you this way....

If you fell on hard times would you rather lose your house or would you rather lose your hunting land? If your answer is your hunting land, use that for collateral. The payment amount is irrelevant. It's all about the risk.

I've seen people make huge financial mistakes by leveraging the equity in their home to finance all sorts of things. It's a really bad idea. If you don't have the money to pay the 15-20% down payment on a recreational tract, then you simply can not afford to buy it. Save your money and do it the right way.

Do it however you feel comfortable doing it just make sure you know what you are getting in to. I bought land, paid 15-20% down (can't remember) paid it off in a year by busting my you know what to make big payments every month. No one but you knows your situation but they are not making any more land I can promise you that! It is the best investment there is as long as you can afford it!

I've used First South Farm Credit, but will never again. They won't let you cut timber without using the money to pay towards the principal. The next 2 times, i used Farmers Merchants bank. 20% down and would go 15 years, if they didn't know you, 20 years if they did. The banking practices changed in 08, so i'm not sure what they do now.

I'm sure each loan is different, but I've used First South Farm Credit and cut timber with no problem whatsoever.

I'm not going to, but had thought about it about 2 years ago. Then my wife quit her job so that I couldn't afford the land anyway, so now it is a mute point.

Did they know you cut the timber?

That's what I was thinking too. How the heck would they even know? I doubt Debbie the bank secretary is doing timber cruises on the weekends!

Yes. I discussed cutting the timber at closing. They knew all about it.

Debbie doesn't but Denson does. I know him personally.

All i know is, at the Oxford office, i discussed cutting the timber on my 40 acre parcel and using the money to buy another 40, and they told me, that the timber was part of the value of the land and that any money recieved would need to go towards the principal. I refinanced thru Farmers & Merchants bank and they told me, it was my timber, i could do what i wanted with it. I would ask, or get it in writing from First South Farm Credit, before i finaced my land with them.

The way I look at it is really simple, the mortgage is on the land not the timber. The timber is a crop just like cotton, beans or corn. I would never work with a lender that wanted to tie a mortgage to the timber. The land should be appraised for the value of the dirt, any improvements (buildings, ponds, etc) and the value of recreation that the land provides. Timber should never be part of the equation. What if a tornado comes through and destroys 75% of your timber? Are you suppose to come up with the cash to pay for it? That's ridiculous. You did the right thing by finding another lender.

When we look at a tract of land the timber is one of the first things we look at. Access, soil, internal roads, location, contiguous owners and everything else is considered. I have seen unscrupulous people contract/buy a tract of land with good timber with little or no down payment, then sell the timber and let the land go back to the whoever financed the land.

Yeah, but your mortgaged amount will have the timber factored in, and will likely be well over the amount of the dirt. I agree though, that doesn't make much sense because a tornado is a very real possibility.

The timber may be factored in, but it is not actually mortgaged. At least not in any of the farms I have bought. I guess it all depends on the lender and the risk.

I agree that the timber is certainly a variable in determining the value of a piece of property. But to actually have it mortgaged as part of the purchase is a totally different matter. The lender's job is to underwrite the risk appropriately and avoid making loans to people who will hang them out to dry. If they are forcing timber continences on people who are actually quality risks, those people should be looking for another lender.

I guess Im not understanding what the fuss is about.

I can certainly understand the lender's point of view.

Example
100k property w/ 50k of timber value.

20% down = 20k
Loan = 80k

You clear cut it & don't apply the proceeds to the principal.
Property's market value is 50k.

Bank is upside down on their collateral.
You are 30k in the black if you walk away.

Your scenario describes one of the risks of lending. It's part of the deal and their responsibility to underwrite risks appropriately. The "fuss" for me is that I do not want a lender to tell me what I can or can not do with my property because someone "might" clearcut a property and walk. Yes, I could cut the timber and reduce the overall value, but a tornado could do the exact same thing. Are these lenders requiring crop insurance on the timber? I doubt it.

Look, everybody is certainly free to choose who they do business with. I prefer to do business with lenders that do not put any requirements on my timber. Why anyone would choose a lender that does is beyond me.

It's not "your" property until it's paid off....

It's never paid for. Miss that tax payment and see. You never quit paying...unless you are a senior living on the property. But if they will tax a nursing home bed, this is short lived also.

I disagree. The bank has no rights to my property unless I fail to pay. They can't hunt it, they can't access it and they sure as hell can't tell me what to do with my timber. So as long as I pay on time like I am suppose to, the land is mine and I'll cut the timber if I want to.

Unless some of you work for the banks, I really don't know why we are arguing about this. If you want them to control your timber, fine by me. I'll keep working with the banks that don't.

I used Southern Ag Credit. Very easy to deal with.

I've had a fairly large home equity line for many years. I've used it a few times to buy land. Worked for me. Redstone didn't give a hoot if I cut timber or not.

Alabama Ag Credit (used to be the Federal Land Bank) has been very good to me. I've heard bad stories from others concerning the Federal Land Bank, but so far they have been very good to me. I would definitely use them again (the local Baldwin County office anyway).
Also, I've cut some timber with no problems. I put the proceeds against principle though.