What are Land Development Loans?
A land development loan is an advance of funds, secured by a mortgage, to finance the making, installing, or constructing of the improvements necessary to convert raw land into construction-ready building sites. In other words, a land development loan takes an unimproved parcel and breaks it up into a number of smaller, improved parcels upon which homes or commercial buildings will be constructed.
These loans are typically interest only and for shorter terms then construction loans. The exit is typically the construction loan or sale of the lots to a builder.