Lethbridge Acreage Loans
While the word acreage can refer to anything over one acre, an acreage loan specifically refers to a lot larger than five to fifteen acres. The mortgage rules for Lethbridge acreage mortgages differ somewhat from a conventional mortgage. The rules for determining your creditworthiness are the same, but that’s about it. For example, the down payment for a serviced acreage lot is 25 percent, depending on the area and marketability. While the bank loan will have an interest rate of 2 percent over prime if it is just raw land with no home. A serviced rural lot requires a down payment percent 25 to 35. If a property is not serviced with water, sewer and electricity it will be considered buying raw land as the home is not livable without the basic amenities.
Why are acreage loans different than a home loan for a property sitting on thirty acres? Why would an acreage loan be treated differently than a loan for a raw half acre lot in the suburbs? This is because Lethbridge lenders prefer properties that are easy to resell if you don’t make the payments. A condo or single family home in the suburbs could be sold in a matter of weeks. Due to the reduced demand for raw land on which one could build a home, Lethbridge mortgage companies mitigate their risk by requiring a higher down payment. The larger the lot, the smaller the potential market. This is in part because of how few people want to maintain 5 to 25 acres, but the higher price tag also limits the potential market. For a residential purchase the lender see the first 5 acres and home is all that is needed.
Raw land that may be zoned for agricultural use may require a down payment of up to fifty percent, while the interest rate is somewhere from two to four percent above the prime rate. Zoned farm land requires a 20 to 25 percent down payment, but you pretty much have to go to an agricultural lender to finance the purchase. If the property is a working farm, you have to go to an agricultural lender. A large property with orchards or horse pasture isn’t necessarily classified as a working farm. The designation applies if the property generates an income from such activities. If you’re selling fruit or horses from the agricultural activities, then you’re not going to qualified for an acreage loan. On the other hand, your de facto commercial loan will be evaluated as such regardless of the parcel size.
With an acreage loan, you could by anywhere up to 160 acres. You may even qualify for a loan for a property with less than 20 percent down. However, the CHMC may not cover the entire property purchase due to the perceived risk. One way to get around this is to buy the house on a 5 to 15 acre lot and pay for the remaining acreage with cash. If you put at least twenty percent down on the property, then there is no mortgage insurance requirement.
Acreage loans will cover a single residence and a detached garage. It will not cover other outbuildings. This means that you can’t use the acreage loan to pay for a horse barn, workshop or second cabin on the property. This may force you to pay cash for these buildings. Conventional lenders will not use equity in the outbuildings as part of the 20% down payment. Note that you’ll need to work with a mortgage broker if you want to buy the acreage and primary residence and the acreage is worth three hundred thousand dollars but the house and 5 acres is worth two hundred and seventy five thousand dollars and the outbuildings are twenty five thousand dollars you will have to come up with the twenty five thousand dollars for the outbuildings as the lender will not finance a barn or old shop. They will only finance the home, garage and 5 acres generally.