Toronto Mortgage Broker

Land Acquisition Financing

For those of you seeking land acquisition financing where money is required for the purchase of developed or undeveloped lots of land, here are a few basic parameters to keep in mind.
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First, there do tend to be several sources for property financing in most areas. The more developed the property and the property location in general, the more land mortgage options will be available.

Land can be purchased for a planned construction project by a home builder or home owner, or for speculative reasons for individuals focused on buying and flipping real estate properties for a profit.

In either case, for residential serviced lots within well developed areas, the loan to value from an institutional lender will likely range from 65% to 75%.  If the property has a planned construction project where the construction financing is already arranged, the related financing cost for a bare land purchase can be as low as prime plus one or two from an institutional lender.

If you take the same type of scenario mentioned above, and moved it into a rural area where only well and septic is available, the financing percentage will drop to 50% in most cases.

The private mortgage market also provides funding for bare land purchases with similar leverage requirements. For well developed sites and locations, private mortgage lending rates will start at 10% and go up to around 14% for unserviced land.

Some private lending sources for bare land will require that you have a plan to build in the near term and won’t finance purely speculative purchases while others will if they like the long term potential of the property.

If you’re thinking about investing in bare land for building or speculative reason and will require a land acquisition financing facility, then I suggest that you give me a call so that I can quickly determine your available options and work with you to find a mortgage that meets your needs.

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About the Author Joe Walsh

I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel

Leave a Comment:

Mishraz says

I am planning to buy 50 acres on the edge of crown land, I want to use the land for hunting, fishing, camping etc. I don’t care about roads as long it is accessible by any trail system on a 4×4.

I am looking for a wooded lot, north west of toronto, if you can do something for me in terms of financing please give me a call.

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Kelly says

My husband and I are wanting to put a bid on a piece of land near muLmur ontario. The property is 23 acres of currently bare land. There was a house on the property which burned down last year. There is a county maintained road, driveway installed, hydro lines tO the building site, and a well and septic in. We would like to Start planning with the intent oF building within two years. We have approx. 60 percent of the land asking price in cash. What are our options for financing both the land purchase and future 300,000 we will require to build eventually?

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John Davis says

Hello,

I would like more info on bare land financing. I am looking at purchasing land in huntsville area. approx 6 acres and 1600 feet of lake front. what are my financing options.

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abbas says

i am planning to buy 100 acre of land which about 45 acre oif it is workable and the rest is threes ,i want to use the land to build a house and also use it for farming the price of the land is 350000 dollars how can i be financed please get back to me thanks.

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Owemanco says

I’ve also noticed that private lenders will also require the borrower to have a source of income at a specified level to service the debt during the duration of the loan.

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