If you want to take out a loan for buying land in Saskatchewan, there are a few things you need to know about borrowing for property that does not have buildings or other improvements on it.
How much down payment to buy land in Saskatchewan
First of all, you’re probably going to have to put down more than you would for a home (which is typically 20% if you want to avoid mortgage insurance premiums and you’ll likely have a higher interest rate. The reason for this is that the land is the only collateral. An owner has a much greater interest in keeping the home where he lives from foreclosure than he does from keeping a piece of open land from going into default, say the banks, which is how they justify the higher interest.
Of course, the type of loan will vary with the plans that you have for the land itself. If you’re going to start building fairly soon after you close on the land, you have to make sure that the zoning of the property matches what you intend to do, so you’ll want to order a professional survey. This document identifies the property dimensions and lines, as well as any easements and required access points. Access and easements have an effect on the value of the property as well as your ability to secure financing. If your planned building will go in an area that has not yet been zoned for development, you’ll have to ask for a zoning change to suit your plans. After you find out whether you can use the land the way you want to, you can apply for the loan.
Property in Saskatchewan
If you’re buying land in Saskatchewan, the hardest kind of property when it comes to financing is unimproved land — raw acreage in saskatchewan that is not connected to any improvement plans. This land has no streets or connection to a sewage system, utilities or other infrastructure. You’ll have to pay property taxes on this land, ironically, even though the existing amenities are virtually nil.
So how much higher is the down payment? Depending on the lender, this can go as high as 50 percent. A local lender that has more familiarity with the area might be more flexible than a larger bank that doesn’t know the town or surrounding area. Amansad Financial has connections with a variety of land lenders who provide financing all over Saskatchewan.
Some lenders view land loans as commercial mortgages, even if you don’t plan to start a business on it. The repayment terms on commercial loans are somewhat different from residential loans, so you’ll want to ask your land loan expert at Amansad Financial. Here are some questions, though, that you may want to consider before you fall in love with the piece of land:
- Does that land already have a proven water source? If so, what’s the depth? Wells are valued by the depth of digging required.
- Does the land have a wastewater removal system in place? Is the land suitable for a conventional septic system?
- Does the seller have a clear title for the property, with evidence that he owns it legally and with a list of any liens? Has the lot been legally partitioned?
- Does the land have any environmental issues, such as soil contamination?
- Does the land have any easements that grant other entities access to some of it?
- Does the seller have an updates survey with boundaries, buildings, improvements and setbacks?
- Is the municipal or provincial government studying the land for rezoning or land use in the future?
- Does the land come with any restrictive covenants that would keep you from doing things you want, such as levelling the soil, clearing some trees or starting a home business?
- Does the land already have such services as mail delivery, telephone, Internet, or garbage and recycling pickup?
Before you make an offer on a piece of land, figure out what you want to do with it — and whether you’ll be allowed to. You don’t want to end up with a useless piece of land, because then you’ll be paying property taxes on something that you can’t use — or sell.
(Adequate Equity + Qualified Real Estate = Mortgage Approval)
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