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Purchasing undeveloped land typically entails more stringent lending conditions. Lenders often require a larger down payment and charge a higher interest rate for such properties due to the increased risk associated with lending for raw land. The process becomes even more challenging if the land requires special zoning permissions for residential or commercial use.

For land lacking essential amenities like a reliable water source, obtaining a loan becomes significantly more difficult. Lenders who do agree to finance such properties may demand a substantial down payment, sometimes as high as 35%, and treat it as raw land financing. This could include requirements like establishing a connection to the municipal water system or ensuring the presence of a functional well, accompanied by a water safety test.

Abbotsford and Chilliwack Acreage Loans

Lenders generally prefer to finance properties that are easier to resell, as some mortgage holders fail to fulfill their repayment obligations. The down payment and interest rates offered by Abbotsford and Chilliwack mortgage lenders vary based on the perceived risk of the loan. Different lenders may have varying criteria for these assessments.

Loans for Larger Properties

Standard home loans usually cover properties up to 5 acres. Beyond this size, it falls under acreage loans, which can extend to properties as large as 160 acres. However, not all lenders in Abbotsford and Chilliwack approve loans for such large properties.

For properties with up to 160 acres including a home, a 20% down payment is typically required. If the down payment is lower, the CMHC will determine the number of acres considered in the appraisal value. For instance, if a property including a home, garage, and 5 acres is valued at $200,000, but the seller’s asking price includes an additional $20,000 for a barn, the lender will not finance the barn. The extra amount would need to be covered independently by the buyer.

Financing for Buildings on Large Properties

When buying large properties with multiple outbuildings like barns or sheds, lenders usually finance only the main house and one garage. The value of additional buildings is considered but not financed. If the total value of the property is $600,000, with the main house and garage valued at $500,000 and additional buildings at $100,000, the lender will not cover the cost of the extra buildings. In such cases, consulting a mortgage broker might be necessary to secure additional financing.

Utility Services and Financing Challenges

Lenders require higher down payments and interest rates for raw land due to the risks involved. Properties needing zoning changes or lacking infrastructure like safe water sources are often avoided by lenders who prefer residential mortgage loans. If a property lacks basic utilities, finding a lender can be challenging. Rural properties without electricity or sewer services are particularly difficult to finance unless they are intended for agricultural use.

Down Payment Requirements for Different Properties

For a ready-to-live-in house with essential services, the down payment could be as low as 5%. A 20% down payment reduces monthly payments and eliminates the need for mortgage insurance. However, for serviced rural lots, lenders in Abbotsford and Chilliwack usually require a 20% down payment, and the interest rate may be higher than standard mortgages. Properties without basic amenities like clean water or electricity pose significant challenges in securing loans, often necessitating the assistance of a mortgage broker.