I really don't understand this. Let's say I have a land worth of $30k. I want to build a house for $60k. The bank will use $30k as a downpayment from my land value and give me $60k to build a house and I will end up paying $30k mortgage. If I decide to pay off my mortgage right away, the bank will lose $30k. Am I missing something?
(Before) You start by owning land worth $30K.
(After) You end owning a house on that land, and owe the bank $60K for a house+land worth $90K or more, hopefully.
The bank now views this as you having 66% loan to value, or as if you put 33% down payment.
Yes, if you default, you run the risk of losing the land. You'll get some money back, but foreclosed properties often sell for well below the fair value.
The house is called an improvement on the land. The house should improve the value of the 30k parcel by 60k. So they're more than happy to lend you 30k.
However, the second 30k to finish the house will probably require many small extensions of the loan as you show progress in completing the construction.
Also, don't be surprised if they require you to show your stamped (by a licensed architect) drawings including, also stamped, electrical and plumbing plans. Oh, and don't forget the zoning clearances and building permits. At some point, you'll have to show all that. Definitely before they lend you anything beyond the value of the land, possibly sooner.