Are you considering buying land in BC? Whether you’ve found a lot in or around Vancouver or Victoria, or if you’re buying up land in a more rural part of the province, if you plan on financing the purchase, there are some things you need to know about a land loan.
Buying vacant land in BC
Let’s start with the way that the banks tend to view land loans. If you take out a mortgage on a home purchase, the banks realize that you have a vested interest in staying out of default, even if your finances get tight — because you don’t want to have to leave your home and have your property foreclosed. However, you’re not going to have that same connection to a vacant lot in most cases, so if you find your income dropping or have some other emergency expenses get in the way, you’re not going to be as averse to letting some land enter foreclosure. So you can expect a higher interest rate and a higher down payment requirement. That helps the banks justify the higher risk that is associated with lending for land without improvements.
The type of loan that finances your land purchase depends on what you want to do with the land. Some people buy land to hold onto for a future investment, while others buy land with the express purpose of putting up buildings fairly quickly after closing. Banks generally do not like land purchases that have speculative use. It’s important to make sure that the property is zoned for the use you have in mind, which means you need to take out a professional survey on the land.
Of all of the types of land loans out there, the hardest to take out can be ones for land that does not already have any improvements or infrastructure on it. Even if you’re buying land without any connection to utilities or any other sort of infrastructure, though, you still have to pay property taxes on that land — even while you’re not using it and it’s just sitting there.
How much down payment for buying land in BC
When you’re buying a house on land, you generally have to put at least 5 percent down (with a high-ratio loan), or 20 percent or more if you want a loan without mortgage insurance. When you’re taking out a land loan, expect to put between 25 and 50 percent down. The difference depends on the policies of the lender, the piece of land in question and the uses that you have in mind for the land. There are different ways to purchase land if you don’t have the required down payment. If you currently own other prime real estate in Canada with lots of equity, it can be added to the loan as collateral to either reduce or eliminate the need for a down payment.
Amansad Financial has land loan experts who can help you with individual questions about your own situation. However, here are some questions that you’ll need to find the answers to about the land in question before you start considering making an offer of your own:
- Do the local and provincial entities already provide services to the land, such as trash and recycling pickup, high speed Internet, a wired land telephone line, or mail delivery?
- Do such issues as soil contamination cause a problem for the use of the land?
- Is the city or province considering rezoning the land, or any part of it?
- Are there any restrictive covenants in place that would affect your ability to do what you want with the land?
- Does the land have a proven water source? If it does, how deep does it go into the ground?
- Is there already a system for removing wastewater from the property? If you needed to put in a septic system, could you?
- Is the title clear on the property? If not, is there a clear list of liens that are already in place?
- Do any easements exist on the property that would allow your potential neighbors, utilities and other entities onto any part of the land?
If you have any questions about whether the piece of land that you are considering is a good investment for you — or whether the loan you are considering is right for you — contact Amansad Financial. We’ve helped many clients find the land loans they needed. Apply Today.
(Adequate Equity + Qualified Real Estate = Mortgage Approval)
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