One day you get up and understand that you can not live like that anymore. You are fed up with this office work, polluted city air, and constant traffic jams. You don’t want to get away to the middle of nowhere, and you don’t have money to establish your own manor out of pocket. That’s when you understand that a farm mortgage ontario and working on your farm is a great idea. Now you need to learn a whole ton of new things you never had time or reason to explore.
What Is Appraisal and Municipal Zoning
This part is dedicated to legal issues. In every country, properties need to be registered correctly. For this purpose, you need to hire an appraiser. This is a person that comes to the property before it is put for sale and inspects it carefully. Later they will list peculiar factors of the area and even tell the recommended price of the property which is important for your farm mortgage ontario.
The most crucial part of inspecting is the location of the land. It is logical that the farther your property is from city amenities, the more difficult it is to sell it and the less it costs, especially if the property needs to be foreclosed because of its borrower`s default. The appraiser will also check the size of the property and any buildings standing on it. Mostly, they pay attention to garages and houses, ignoring any out-buildings, like barns or other structures.
Another very important factor is the idea of the value of the land. Land value varies greatly, depending on one’s opinion about its future potential. Before putting any property for sale, you must decide what to do with it. It can be kept as an investment or sold for a quick profit, or used to pay off debts or to produce money for your family. The appraiser is looking for consistency in your plans, which means that you should be clear on what exactly you want out of this project and why you want it in a particular place.
To get a farm mortgage ontario the appraiser will also look into all of this information and tell if he thinks that the land is worth something or not. The municipal zoning is very important too since the income derived from it will go to you.
If you are planning on building any new buildings or renovating your house, it is very important to check the peculiarities of the neighborhood. This includes broken electrical wiring, poor roads, lack of water supply, and so forth. The appraiser will also check if they are standing on a “wet area” which means that the area has marshy soil that prevents raising crops – a typical situation in Eastern Ontario.
The appraiser will look into these local factors during his inspection since he will receive money according to this information. On a more general level, you need to know that through your farm mortgage ontario you will get a mortgage on your land and on all structures standing on it. This is very important especially in the area of Ontario because their law requires an appraisal even for lawn furniture! In this way the authorities prevent fraud.
So, the appraiser looks at the:
- location of the property
- size of the property
- buildings on the property
- whether it has a water supply and septic system or not
- other factors depending on the situation
In this case, they will be able to determine the final price of the property and what it can be used for. He can also ask or check a “certificate of water portability” and “well driller’s certificate” for wells and water on the land. The zoning will determine whether it is a “county residential” type of land meaning that farming is prohibited on it or it is “agriculture” land where you can build a farm, but where it is very hard to get lender’s approval because farming is a very risky thing to do.
A Farm Mortgage or a Regular Acreage Mortgage? Which one should you choose?
Both types of mortgages are not very easy to get, but they also differ greatly because of the collateral you will be used to secure them. For a farm mortgage ontario, you will need such things as horses, equipment, and crops. But because the collateral is so important and can be taken away at any time you should use something that is very difficult to steal or damage heavily. It would also be good to use things like land and buildings, all of which can bring profit and help your economy grow.
To secure a regular acreage mortgage, on the other hand, you will not need any sort of collateral for the loan. This lost security only raises interest rates on your loan since it is not protected by anything. Therefore it is probably not worth using this method to borrow money for working on your farm.
They are also different in percentages that you need to pay and down payments. For a regular acreage mortgage, you need to pay a 20 percent down payment in cash and the rest through the loan. For a farm mortgage, you just need to put down 25% — 30% of your money, and the rest is up to you.
To get a farm mortgage ontario there are two ways:
- The first one is that you do not even need an appraisal or municipal zoning, just a simple process of filling out an application and paying the fees through your bank. This method is much faster and usually much cheaper than other methods, but it can be dangerous too because basically you buy everything without any inspection and there is no room for error.
- The second method is a little bit more complicated and requires a complete inspection before even applying for the loan. Through this, you can find out if the land is suitable to be used as collateral for your loan and whether you need any modifications or even construction after repairing or selling it. Also, this method increases the chances of getting the approval of your lender and speeding things up considerably.
Farm Mortgage Ontario: How To Find These Loans
Because there are so many options to obtain a farm mortgage ontario, we decided to make a guide on where exactly you can obtain one and what conditions will be needed to receive it. We will look at them:
- Official banks
- Savings and credit unions
- Private companies
There are several places where you can start looking for your farm mortgage ontario. First of all, you can always talk to banks about the matter. Most of them will not be willing to offer you money in this way but they will point you in the right direction. Sometimes they can give you valuable advice about how to get it and what not to do if the case is important for them. Also, they might recommend some other banks which are specialized in this field. Such banks will often provide agricultural loans
Another good source is a savings and credit union. They are more willing to give out money for this project, but will also want to take the collateral into their possession. This method is very similar to getting a home mortgage. They check your credit history, need all sorts of paperwork, and so on.
Another option is private companies that specialize in agricultural loans. These are banks composed entirely of farmers who have decided to work together. You can also take advantage of this sort of bank because they are usually very cheap and you will not have any problems with collateral since all members are farmers themselves. However, sometimes they ask for impossible collateral or hard-to-find documents which might just discourage you from applying there at all.
The Canadian Agricultural Loans Act Program and Farm Credit Canada
These are options that need to be regarded separately because they are special government programs. The programs were established to help farmers in order for them to have access to long-term loans. The amount of money they are authorized to give varies greatly from province to province, but it is usually about 40 — 60 thousand dollars.
The approval process is easier than other options because they accept criteria that are more relaxed than the ones that banks normally need. This is the option that you need to go for if you want to get a loan easily.
Who can apply for farm loans in Canada including Canadian Agricultural Loans Act Program:
- beginning farmers (that is, less than 6 years of farming)
- part-time farmers
- start-up farmers
- existing farmers
- farmers taking over the family farm
- agricultural cooperatives with a majority (50% + 1) farmer membership
Another program called Farm Credit Canada offers loans of up to 500 thousand dollars. These are long-term loans with help of federal government tax transfers. The approval process also is very easy compared to one of the regular banks. This bank offers financing for land, machinery, equipment, and livestock as collateral for your loan. Another great advantage of this sort of loan is that you can use it not only for buying farmland but also for increasing its value by raising the quality or developing the infrastructure on it.
Usually, the bank that you choose will help you to find even more reliable and cheaper banks that can offer you loan packages for less than the one you need. If this is the case, they will give you a breakdown of all charges and fees and include them in your final price. A good example of such a program is called Canada Small Business Financing Fund. It is a government program sponsored by the Canadian federal government, which offers loans of up to 85 thousand dollars with low-interest rates and easy approval procedures. The interest rates are usually less than 4% per year.
No matter what option you choose, you should always get an appraisal done if it is important to you. Even the Canadian Agricultural Loans Act Program requires you to have everything inspected to make sure that your money is not thrown away. Appraisals are very useful because they give you the final price of the land and how much money exactly do you need to make it profitable.
Appraisal costs are very high, so they might be a little bit discouraging at first, but after gaining this information, they will help you plan your expenses and figure out whether the land is still worth buying or it would be better just to move on and forget about it. But we already talked about it.
Conclusion
Getting a farm mortgage in ontario is a complicated process. With no experience and knowledge of the local rules, it’s nearly impossible to do so — unless you really invest your time in researching the topic. If you need help, don’t hesitate to request professional help. With the right information, planning, and budgeting, it is easy to get money to build your dream house. Good luck!