FAQ – Equity

I bought land several years ago that is worth much more now than I originally paid for it. Can I contribute the land to my building construction project as equity? Will it be valued at cost or market value?

Land may be used as the equity injection in the project. The appraised value may be used if the land was acquired more than two years prior to the application date and the appraisal is accompanied by a title report covering the sale history for the past five years. Otherwise, the lower of cost or market value must be used.

The borrower's contribution may include the buildings and site improvements on the contributed land as long as they are used in the project.

I am buying a building at less than market value. Can I use the equity in the property as my 10% equity injection?

No, the project value will be based on the lower of cost or appraised value. However, an exception to this rule is that a "land write-down" DOES qualify as equity.