Thinking of escaping the hustle and bustle of a big city and buying a little piece of Alberta land you can call your own? You are not alone. Our Real Estate team receives plenty of requests from people looking to buy raw land. However, for many people, it remains a remote dream due to the financial requirements of lenders.
One of the first questions we ask when people express an interest in purchasing land in the Municipal Districts of Rural Rockyview or Rural Foothills, is if they are pre-approved for a land mortgage and if they have a builder lined up to build. The reason the answer to those questions are important is because most people do not know that they usually need to have a 50% down-payment when buying land. The lender’s risk is higher for raw land so that’s why the 50% down is required by most lenders. Alberta Treasury Branches often make exceptions where you will need only 35% down but that depends on circumstances.
One of the exceptions that lenders make to the 50% down rule is if the piece of land is in an existing subdivision with services already there and/or if there is a building commitment deadline on the title. For example, subdivided acreage parcels like in the Springbank or Bearspaw areas, for example, may have builders that you are required to use when building. They usually also have a building time-line attached to the Title of the property in addition to architectural controls. Moreover, many of these parcels would have services already to the land. With an established subdivision with time-lines and services in place, Lenders will then advance mortgage funds in stages as the home is being built and buyers don’t require 50% down.
A caveat on the title for a building commitment could be that the home must be built within two years of the land purchase. If you can’t meet the building time-line, then you will lose the land. This is also something Lenders look at when granting mortgage approval, so the other questions we ask are: do you need a property without building commitments on it, or do you need special zoning for the acreage (eg, commercial, agricultural, etc)?
If it’s strictly a raw land purchase not in an established subdivision, lenders know that it could cost buyers $100,000 or more to bring services to that parcel of land – septic, well water, power, heating, a road, etc – so they take that into consideration as well when lending for raw land purchases.
If you are still looking to purchase land around the Calgary area, while it’s important to get pre-approved for a mortgage, it’s also equally important to find a Realtor® who can help you achieve those land-ownership goals. Please don’t hesitate to contact your Calgary-area Realtor®, Elke Babiuk if you have any questions or if we can assist you in purchasing acreage properties – 403-278-SOLD (7653).
