Acreage Financing

Ask not what the country can do for you, but what you can do in the country!

Author: Trevor MacMillan - Dominion Lending Centres

For many the dream of living in the country is unquenchable. The idea of watching the sun go down from the silence of your front porch with only the sound of crickets serenading you after a day of quad-ing in your back yard and gathering fresh produce from your garden is the perfect city escape. And although there are many benefits to country living, there are costs involved that need to be considered. Mortgage financing is similar to city lending but there are some key differences.

The first thing to know is zoning. Country Residential is a rural subdivision made up of small acreage lots. Rural is a larger acreage frequently 40, 80, or 160 acres (160 acres =1/4 section). Agricultural land is for farming use and cannot be financed by normal mortgage companies or banks. I won't go over agricultural requirements as it's considered a business not residential.

How much down payment you've got and your debt ratios will determine how much land you can afford. Most lenders will only lend on the value of ten acres, the house, and up to a double detached garage. Be prepared to pay for anything over and above 10 acres and any outbuildings out of pocket in addition to your down payment. A minimum 5% down is required for a high ratio, CMHC insured mortgage. The bigger a property is and the farther away from a population centre the higher the down payment requirement will be.

It's also good to note that there's no alternative lending in rural locations so it's a good idea to keep your credit on the right side of reputable so you’ve got options if you need them. Remember, no credit is worse than bad credit.

Water and sewer services, although not glamorous, is important to saleability. If the property has a well then a Water Potability test will be required. If it has a new septic system you may be required to get a Septic Certificate.

All kinds of income potential exists with extra land but the standard rule is that your main income may not be derived from farming or other businesses on the property. This does not mean that you can't rent out a room or lease a field to the farmer next door but banks don't want to give you a mortgage if it's really a business loan.

Like the idea of retiring to the county? Consider using the equity in you city home for a down payment and rent it out. Rental payments in addition to your pension can qualify you for the new mortgage. Then when the workload becomes too much in your twilight years you can just move back to your old home in the city and rent or sell the acreage.

It's a smart idea to use a mortgage broker for all your mortgage needs but acreage financing is an area that benefits even more from a broker's ability to access different lenders depending on the type of property and needs of the client. You won't find that at any one lender.

If you have questions about acreage financing please call Trevor MacMillan at (780) 455-4181.

Just Ask Mike - Help me find Acreages that are suitable for residential mortgages.

Trevor MacMillan
Dominion Lending Centres Lender Direct