Rural Property Financing in Red Deer

Financing a large piece of land with a home as your primary residence brings with it challenges you wouldn’t face when trying to secure a mortgage for the average suburban home. In fact, there are relatively few Red Deer mortgage lenders who would extend a mortgage because of the limited market for such properties, though you can find them through your Trusted Red Deer mortgage broker team at Whalen Mortgages. Mortgage insurance CMHC for large acreage properties have restrictions as well. However, you can finance an acreage with as little as 5% down.  There are several factors that lenders consider aside from the standard ones like the clients credit, the size of the down payment and how marketable the property is.

The Land

If you have an uninsured mortgage meaning you put 20% down, you can buy up to 160 acres or ¼ section. However, the mortgage insurer generally allows only 10 to 15 acres to be included with the value of the “home”. If you’re putting less than 20% down on the property, you have to have insurer approval to buy it. They may allow more than 15 acres to be included, though that is at the lender’s and insurers discretion. This means you may need to come up with the difference for the remaining acreages out of pocket on top of the down payment required.  If you are putting 20% or more down on the property, then you could finance up to 160 acres with a single mortgage.

Note that these rules are only for acreages, homes on a lot larger than five to fifteen acres. There are separate rules for working farms. Working farms must generate revenue and conduct business activity. If the property meets this standard, then the mortgage falls under commercial lending or farm credit. A large acreage so that you can garden or maintain horses for your pleasure, though, falls under the rules we just described.

Outbuildings

Most mortgages will only include a single outbuilding in the primary mortgage, such as a garage. Barns, Quonset huts and other outbuildings won’t be covered. You may need to pay for these outbuildings with cash.

Suppose you want to buy a property listed for $500,000. If the property is appraised for $450,000 because they won’t include the barn and workshop, you’ll have to come up with that 10% difference out of pocket along with the down payment required on the $450,000 purchase price.

Water

Potable water is essential to habitability. There must be a safe source of water for the home for you to be able to secure a conventional mortgage on it. This could be water from the municipality, a water tank on the property that’s transported in, or a well. If there is a well or holding tank, the lender will probably demand water testing to ensure it is safe. Call your Red Deer trusted Mortgage Brokers at Whalen Mortgages today to get started 587-315-3525.