When you buy land in Canada, the process is similar to buying any other type of real estate that has buildings on it already. There is a stack of paperwork for you to complete to ensure that all of the municipal, provincial and federal regulations are followed through the process, even if you go through a private sale instead of using a real estate agent. It is important to make sure that you perform the due diligence going into the purchase, including running a title search to make sure that there are no outstanding liens on the land. Also, such closing costs as a land transfer tax can come into the situation as well. Unless you are already an expert in real estate, we suggest that you enlist a real estate professional to help you through the process.
How to Get a Mortgage for Land in Canada
As with any mortgage, the loan application involves providing a lender with information regarding your income and your credit history as well as the down payment you have on hand. Depending on the type of lender and your own credit score, and your intentions for building on the land, you can get a mortgage for as little as 25 to 35 percent down. If you can get that low of a down payment, your credit is good and you intend to build on the land. If you have to go through a private lender, your required down payment would be at least 45 percent and might go to 50 percent or even higher, depending on where the land is and what your credit score is. 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.
Land Mortgages in Canada
The reason why land mortgages so frequently require a higher down payment than mortgages in improved land is that the value of the property is significantly smaller without buildings on the land, and that the risk associated with the loan is greater. Residential mortgages represent the least risk, because borrowers do not want to lose their homes (which happens if foreclosure comes to fruition). With land, though, there is nothing personal for the borrower to lose if he or she falls behind on the loan – and many times those borrowers also have residential mortgages to pay, and if bad financial news comes, that residential mortgage will take the highest priority if the borrower has to make hard choices about which note to pay.
Where to Get a Land Mortgage in Canada
Traditional lenders are generally the first place to start when it comes to looking for a land mortgage. After all, they usually offer the lowest interest rates. However, not everyone can qualify with a traditional lender, because the rules that those lenders have to follow with regard to income verification can make it difficult for many people who have the means to pay their mortgages to secure approval, particularly when the mortgage is for property other than a primary residence.
Private lenders can often stand in to provide crucial funding assistance for people who can afford mortgages but do not yet have the metrics in place that the traditional lenders tend to require. There are some instances when you can set up a “blanket” or “inter alia” mortgage, where you put up another property as additional security on this mortgage, but this is generally only available through private lenders. This sort of arrangement can give you access to funding that helps you accomplish your financial goals.
Things To Know Before Buying Raw Land
Whether you’re considering a land purchase for commercial development or a land purchase for residential purposes (your own house or for building a property for investment), it is a decision that can pay off big time. People who bought up land in rural or semi-rural areas on the cheap in the past, only to watch nearby cities grow closer and closer, have found that their investments have paid off many times over. Land in the outlying areas surrounding cities from Vancouver to Montreal, and many in between, has turned into financial bonanzas.
When you make a raw land purchase in an area zoned for agriculture, or you make a land purchase in a partially developed area, then you could face an uphill battle getting your land zoned for a more marketable purpose. It can take years to accomplish, though – so understanding the zoning of your land is crucial before you sign on the line. Provincial governments will only commit to land development plans that last five years, and when the right people ask for change, those plans can change in the blink of an eye.
When you’re checking out land purchase, whether to subdivide or develop in a different way, consider the proximity to city infrastructure, such as existing services for water and sewer, because that land is more likely to gain approval for development later. Land that is easy to access and/or nearby major routes for transportation are better investment choices as well, because you won’t have to wait for commuter infrastructure to be put in place.
Commercial Land Development Financing
Land development financing is often much easier to secure than vacant land financing. If you have a plan for putting together a residential development, a golf course, a casino, a hotel, a factory, or even storage sites and self builds, that can go a long way toward helping you put together a financing proposal that will get you the funding you need. Lenders like to work with people who have thorough plans put together and can show them where their investment will pay off.
How to Get Land Financing in Canada
Amansad Financial has established a superior reputation throughout Canada for people who have the means and ability to pay for mortgages but cannot meet the lending requirements that most banks and credit unions set up, thanks to our network of private lenders. Since our founding, we have earned a reputation for outstanding customer service. We excellent turnaround time, efficient underwriting for our Direct Lender Group Network. If you either own land and need to take out a mortgage on it, or you want to buy a piece of land and need a mortgage to finance it, get in touch with us today!
(Adequate Equity + Qualified Real Estate = Mortgage Approval)
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