In the first part of this series, we went over some of the basics of what conversions are for the loans you can get from Heritage Land Bank. But now we're going to dive deep into the process that we use to convert the interest rates to lower costs for the customers, and what that can mean for you individually.
When we see a client that is paying a high interest rate on a loan taken out with us, we are effectively able to "re-borrow" the money from the Farm Credit System, so you and Heritage end up with much lower financial burdens.
As you likely already know, banks use the money from their depositors for loans to those who apply and are approved for the financial assistance. Most deposits are very short term by nature, or the client could decide to up and leave the bank altogether. What this means is that banks cannot give out land loans for more than five years, or the fixed rate maturities beyond this point will pose significant financial risks. If the banks provide loans for more than this initial period of time, they are sold in a secondary market.
This means that banks are stuck with the interest rates they charge people, so customers with a regular bank do not have much freedom or financial flexibility. Since Heritage Land Bank is a member of the U.S. Farm Credit System, we don't rely on depositor money at all, because all of the cash comes from the national money market.
There is effectively no profit impact for Heritage to complete the conversion process, because the difference between the interest rate charged to the client and the interest we pay for our money doesn't really change.
If you are interested in securing a loan with us to buy land in Texas, contact one of our representatives today!