By : Radu Arvatescu
Are you in the market for a mortgage on an empty lot or financing for a rural property? If you go through a traditional lender like a major bank, you could be disappointed in the outcome. Rural and land mortgages in Ontario come with some of the highest risks of any mortgage product. Banks today are naturally risk-averse, despite a strong economy.
Fortunately, you’re not out of luck when you want to purchase real estate. With the help of a mortgage broker, you can get access to non-conventional lenders and even some special large lender packages that aren’t advertised to the public.
Find out why most lenders avoid land mortgages in Ontario and take steps to work with a broker that can deliver results.
The Three Types of Land Mortgages That Big Banks Rarely Touch
Rural and land mortgages in Ontario can be divided into three main categories. While each can represent a sound investment, there are reasons why non-conventional lenders are usually the best option for financing.
- Rural Property Mortgages: Ontario features some of the most pristine rural farmland in North America. If you want to develop rural land for commercial purposes, you will need a rural property mortgage. As you will find on the next two items on this list, most big banks rarely lend on rural properties because the resale market simply doesn’t exist. Regardless of your intentions going into the mortgage contract, any default and reversal of the loan will make it near-impossible for a bank to recoup their costs.
- Land Mortgages in Ontario: You can take out commercial land mortgages to buy rural land or urban lots. The investment here is the land itself, rather than any structure that is on it. The risk comes from the lack of resale potential. If you take out a mortgage on the land and don’t develop it, a bank would have an extremely difficult time foreclosing and selling the land. Some big banks will extend finance for this type of mortgage, but the down payment will be much higher than the standard 20% – 25% that is common in other commercial mortgages.
- Land Title Loans: While not strictly a mortgage product, you can still gain context by learning about land title loans. Also known as equity lines, big banks often avoid these lending products because there’s a high risk that a borrower will become unable to repay the loan. If this occurs, the land is often in a location without a strong resale market, so the bank is left with little chance of recouping their costs from collateral. Land title loans are like home equity loans in the residential market, with the difference being that there is no house involved. This makes resale an uphill struggle.
What Are Your Options for Land Mortgages in Ontario?
It’s easy to understand why big lenders don’t want anything to do with land mortgages in Ontario, but that doesn’t help your situation. The good news is that you don’t need to go to a bank if you want a commercial land mortgage.
There are countless highly reputable non-conventional lenders who will extend credit, although you are likely to see above-average interest rates and down payments to close a mortgage. You can minimize the impact by working directly with a mortgage broker, who will actively shop for the most competitive packages.
Buy your mortgage through a broker and you will enjoy a higher application success rate with more choice and less legwork. A broker becomes your representative and advocate, finding a mortgage that is perfectly tailored to your needs.
Lowest Residential Mortgage Rates in Canada*
|Term||OUR RATE||TD Bank Rate|
|3 Year Fixed/ 25 yrs||5.89%Promo||6.53%|
|4 Year Fixed/25 yrs||5.54% Promo||6.32%|
|5 Year Fixed/ 25 yrs||5.39% Promo||5.81%|
|5 Year Variable/ 25 yrs||6.20% Promo||7.15%|
|5 Year Fixed/ 30 yrs||5.99% Promo||6.39%|
|5 Year Variable/30 yr||6.80%||7.25%|
|3 Year Fixed/30yr||6.64% Promo||6.81%|
|**NEW RENTAL 5 Year Fixed /30yr||6.44% Promo||6.44%|
|** NEW RENTAL 3 Year Fixed /30yr||6.68% Promo||6.68%|
Updated: DEC 05 , 2023
* Current promotion rates may provide an additional 0.05% discount or may be anytime discontinued at the Lender discretion.Some condition may apply.Rates may vary between geographic regions and the posted rates on this website may not be available in your area.TD Bank rate used for comparable are the rate listed in the Broker Chanel Portal by TD Canada Bank at the date above. Please contact our MCI office for more details and current promotions.
LOWEST REGULAR RATES IN CANADA* * Current promotion rates may provide an additional 0.10% discount. Rates may vary between geographic regions and the posted rates on this website may not be available in your area. Please contact our MCI office for more details and current promotions.