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Mortgages and Financing For Vacant Land in the GTA and across Ontario.
If you are looking to get financing to buy land in the GTA or anywhere else in Ontario, there are different types of land loan options that are available to you.
Can you get a mortgage for land?
Many Canadian mortgage lenders offer vacant land loans or raw land loans as they are called, which are used to purchase undeveloped land. Some lenders call the raw and vacant land loans as land mortgages, but they differ from traditional residential mortgages. You can also get a construction mortgage if you want to both buy the land and build a home on the land you purchased. Some lenders consider purchasing land and holding it for future development to be a commercial mortgage, especially if the amount is particularly large.
Land Purchase Loans
Residential mortgages are secured loans that use the property as collateral, which includes both the land and the home on the land. Raw, vacant and lot land loans are only secured against the land since they will not have an existing home or structure on them. If the borrower of a land mortgage loan defaults, the lender might have a harder time trying to find a buyer and to sell the property if it is undeveloped in a foreclosure or power of sale. This is especially true for raw land loans, which might not even have road access or utilities.
This then makes land mortgages and land loans a bit of a riskier type of loan for lenders compared to a residential mortgage. To make up for this, those looking to get a mortgage or loan for land in the GTA or across Ontario will have to make a large down payment and typically pay higehr interest rates. Lenders can require a down payment of 50% for raw land at times. It is important to note that if you are planning to build an investment property there, you should also consider the costs of building a house. You may have to calculate the amount of concrete, wood, and other materials required to build a house before understanding how much the construction will cost.
Construction mortgages which are also known as construction loans, allow you to borrow money to buy land if you plan on building a home on that land. Construction mortgages let you borrow money in stages, called "draws", that are released at certain milestones. The mortgage will cover part of the cost to build the home as well as the cost of the land. The first draw is usually used to purchase the land lot if the borrower does not already have a plot of land to build on.
Construction mortgages require only interest payments during construction.
Our experienced team can help you mwith your GTA or Ontario Vacant Land Loans