One of the most popular questions for potential property buyers – what type of mortgage can be obtained on the most favorable terms?
Nowadays, the land property is considered one of the most valuable assets a person can own. Many Canadians underestimate the value of this type of property, but ownership of a parcel of land opens up a number of opportunities for a person. Even a small parcel of land can be used to the owner’s advantage if there are minerals or water resources on it.
You should be aware of the actual value of your land to assess what financial transactions you can make if you waive the question of how can you get a mortgage for land. Specifically, you can take out different types of loans for your land property. The most popular types are land mortgages, title loans, and rural land mortgages. If you opt for any of the above types of loans, you might encounter some difficulties with the banks – they are very reluctant when it comes to risky transactions.
Mortgage for land
Vacant land mortgage Ontario can only be taken for the land itself, the buildings on the land cannot be taken into account. The main problem that arises, in this case, is that the banks do not consider the land itself, without buildings and construction, as a safe investment. In the event that the borrower fails to make his regular payments and his land is to be sold or rented to someone else. Banks usually agree to land mortgages only if the borrower makes a large initial payment. Banks protect themselves by encouraging the consumer to increase the equity in the property by making large down payments.
Land title loans
In this type of loan, the title serves as security for the creditor. Banks are reluctant to provide funds to borrowers relying solely on title as collateral because of the high risks involved. The biggest fear of the lenders is the default of the borrower. If the borrower stops making payments, the land will be foreclosed and sold. Depending on the location of the land, there may be certain problems with the sale, for example, if the land is far away from the city, so it has no value to the money lender.
Mortgages for the rural property
This type of credit can only be given for land and buildings located outside the city, in rural areas. This type of loan is considered the riskiest among lenders because of two factors. Firstly, if the borrower defaults, it would be very troublesome for the bank to sell the property. Second, this type of loan does not require a large initial deposit, so low equity in the property makes the process risky for the lender.
How can you get a mortgage for land?
It is no secret that banks try to avoid these types of loans because the credit terms are very unfavorable to them.
If you find yourself in protracted negotiations with the bank while you are full of determination to buy a farm or land for a house outside the city, try to use the services of a private lender. They may be more flexible and you can come to a conclusion with them much faster than with a regular bank. In addition, private lenders usually offer more customized terms and more favorable conditions.
The advantage of private lenders is that they are not bound by strict corporate guidelines like big banks and can set the terms as they see fit. They can decide for themselves what level of risk they are willing to take. It’s a little easier to negotiate with them, and it’s more than possible to agree on terms that suit everyone involved.
It might also be a good idea to use the services of a private lender if you want to use your property as security for a mortgage on another property with a lower interest rate or higher amount.