Case 1
- What does the land cost?
- 100000
- How much do you put down?
- 20000
- Annual interest rate (APR)
- 8.5%
- Loan term
- 15
61,802.50
Open with these valuesLand Loan Interest Calculator
61,802.50
Result: 61,802.50A land loan amortises like a mortgage, but runs shorter and dearer — and the difference shows up in the interest. Financing 80000 of a 100000 lot at 8.5 % over fifteen years costs 61802.50, three quarters of what you borrowed. Principal and interest only.
Worked examples
Case 2
- What does the land cost?
- 250000
- How much do you put down?
- 100000
- Annual interest rate (APR)
- 7%
- Loan term
- 20
129,107.62
Open with these valuesCase 3
- What does the land cost?
- 60000
- How much do you put down?
- 12000
- Annual interest rate (APR)
- 9.25%
- Loan term
- 10
25,746.85
Open with these valuesHow it's calculated
Interest = M × n − (price − down), n = years × 12
- StepEnter the agreed purchase price of the lot.
- StepAdd your down payment — land loans often need 20 % to 50 %.
- StepEnter the rate your lender quotes and the term in years.
- ResultRead what the financing costs on top of the price.
What this number means
Same maths as a mortgage, different terms
The amortisation formula is identical, but land loans commonly run 5 to 20 years, ask 20 % to 50 % down and price 1 to 3 percentage points above comparable home mortgages. Raw land costs more than an improved lot.
Principal and interest only
Property tax, land insurance, survey and appraisal fees, title costs and lender origination fees are billed alongside the loan and are not in this figure. Budget for them separately.
Check for a prepayment penalty first
Paying down an amortised loan early saves a lot, because it front-loads its interest, but some land loans charge for it. Without a penalty, extra principal and a shorter term are the two effective levers.
Commonly misread
The 61802.50 is interest on the full 100000 price.
It is the interest on the 80000 actually financed, over fifteen years at 8.5 %. The 20000 you put down is not borrowed and costs nothing.
A longer term is the cheaper option.
It lowers the monthly payment and raises the total interest. Compare the same lot over 10, 15 and 20 years here and the gap is obvious.
Closing costs are somewhere in this total.
They are not. The figure is all the scheduled payments added up, minus the amount financed, and nothing else.
Reference table
| Price, down payment, rate, years | Monthly payment | Total interest |
|---|---|---|
| 100000, 20000, 8.5, 15 | 787.79 | 61802.50 |
| 250000, 100000, 7, 20 | 1162.95 | 129107.62 |
| 200000, 40000, 8, 15 | 1529.04 | 115227.80 |
| 60000, 12000, 9.25, 10 | 614.56 | 25746.85 |
| 500000, 250000, 6.5, 30 | 1580.17 | 318861.22 |
| 50000, 10000, 0, 5 | 666.67 | 0.00 |
Questions
How is the interest on a land loan calculated?
A land loan uses the same amortisation formula as a mortgage: M = P × i(1+i)^n ÷ ((1+i)^n − 1), where P is the amount financed, i the monthly rate and n the number of payments. The total interest is then all the payments added up, minus the amount financed. Early payments are mostly interest, later ones mostly principal.
How much down payment do I need for a land loan?
Most lenders want 20 % to 50 % down, well above the 3–20 % typical for a home mortgage. Improved lots with road access, water and utilities qualify for the lowest down payments, while raw undeveloped land demands the most because it is harder to resell after a default. A larger down payment also tends to lower your rate.
Why are land loan rates higher than mortgage rates?
Land is riskier collateral than a house: an empty lot is harder and slower to sell after a default, and it earns no rent in the meantime. Lenders price that in, so land loan rates typically run 1–3 percentage points above comparable home-mortgage rates. Raw land costs more than an improved lot.
How long are land loan terms?
Commonly 5 to 20 years, shorter than the 30 years standard for a mortgage, and some lenders add a balloon payment at the end. A shorter term raises the monthly payment but cuts the total interest sharply. Compare the same lot over 10, 15 and 20 years here and the gap is obvious.
Can I pay off a land loan early to save interest?
Usually yes, and it saves a lot, because an amortised loan front-loads its interest. Check the agreement for a prepayment penalty first — some land loans have one. Without a penalty, extra principal payments and refinancing to a shorter term are the two most effective ways to cut the total.
Does this include property taxes, insurance or closing costs?
No — this is principal and interest only. Property taxes, land insurance, survey and appraisal fees, title costs and lender origination fees all vary by location and lender and are billed alongside the loan. Budget for them separately.
Sources and last check
Information, not financial advice.