Flexible and creative Alberta acreage mortgage options:

We have the pleasure to work with many clients who have approached their bank about purchasing a new acreage in Alberta only to find out that their bank typically doesn’t love financing acreages and will put up various road blocks along the way to try and either reduce their approval amount or not approve their mortgage at all.  The two biggest stumbling points that you will typically find are:

• The bank will only finance the value of your home plus five to ten acres of land:
  • For example, this can become a challenge when you are purchasing an home with 30 acres and have 20% down payment.  If we assume your home value is $300 000 and your per acre value is $10 000, this would yield a $600 000 purchase price.  In the case of a lender who will only lend on a home plus 5 acres, they will use a $350 000 value and lend on 80% of that.  This would result in a dramatic increase in your down payment required.  In the above example if you have budgeted 20% down payment for your $600 000 purchase, you were planning on a down payment of $120 000.  Unfortunately this down payment requirement almost triples up to $320 000 with a house plus 5 acre lending policy.
• The bank will only finance your home if it is zoned country residential and will not consider an acreage that has an agricultural zoning:
  • It is true that most lenders in Alberta will not lend on farm land that is actively being farmed.  The reason for this dates back to the foreclosure laws that were enacted during the depression and extend some significant protections to farmers and are not favorable to mortgage lenders.  If you have an active farm that you would like to finance your best first option is typically Farm Credit Canada.
  • If you have an acreage that you do not actively farm but your zoning is agricultural and you have 30 to 160 acres, often it can be quite challenging to have most of the major lenders in Alberta lend on your home due to their fear of potential farming operations.

The good news is that within the province, we do have other Alberta acreage mortgage lending solutions:

• Our first solution solves the house plus 5 or 10 acre valuation issue:
  • We do have lenders that will consider valuing your acreage based upon your home plus up to 160 acres.  The loan to value can be up to 80% however we have an internal sliding loan to value scale based upon your proximity to the nearest town or urban centre.  For example the closer we are to a major centre the closer to 80% loan to value we will often receive.  That being said, it is important to note that we might receive 80% loan to value with a house plus 5 acre lender and 70% loan to value with our alberta acreage mortgage lender but as in the above example, by including the value up to 160 acres we will often obtain significantly more mortgage funds for you.
• Our second solution solves our agricultural zoning issue:
  • With our Alberta acreage mortgage specialization we are able to approve your mortgage with an agricultural zoning with the following conditions: We are able to use your home plus a detached garage in your valuation, as with almost all lenders additional outbuildings are not considered in the valuation.  We can lend on up to 160 acres of value provided you do not have an active commercial farming operation, when we complete the appraisal if the number and type of outbuildings indicate commercial farming activity unfortunately we will not be able to lend.  However if you are financing your acreage and you have 20, 30, 100 acres of land that is not being commercially farmed then we definately have great lending options for you.
• So, is there a catch as it relates to higher rates or more restrictive terms?
  • That is a great question, and the answer is NO – we are able to offer market leading mortgage rates and terms for your Alberta acreage mortgage – whether it is a purchase or a refinance.

Please always feel free to contact me directly to discuss your flexible and common sense Alberta acreage mortgage lending options -Rylan Hahn 403-802-7201.