Acreage Mortgages in the Fort McMurray Area
Financing an acreage as your principle residence carries a few challenges. Due to the rural location of most acreages, there are fewer lenders who will extend mortgages in those areas due to marketability of the property. Mortgage insurance providers (CMHC, Genworth, Canada Guarantee) have some restrictions on acreage lending. Although, acreage financing can be achieved with five percent down payment.
There are 3 major factors in acreage mortgages that mortgage institutions consider in addition to the standard lending considerations of the client including their credit, amount of down payment, and the marketability the subject property is:
With an insured mortgage, it is possible to purchase a home on up to 1/4 section (160 acres) however, the insurer generally only allows fifteen acres to be used in determining the home value they will assign. Putting less than twenty percent down you are required CMHC insurance on your property. The insurer can allow more land in the value at their discretion. If you have over 20 percent down payment you can get up to a quarter hector at one lender.
The only outbuilding to be included in the value is one garage if there is an attached garage they will use that in the value if there is only a detached they will use that in the value, they will not use any outsourced buildings including barns or Quonset in the value, if you decide to purchase an acreage with a garage and outsourced buildings the seller may want more money to cover the Quonset or barn that is on the property if you chose to purchase this acreage you would be required the down payment on the home with one garage and also pay for the outsourced buildings to the seller cash not to be included in the mortgage.
It is necessary to have water supplying the home be safe for consumption, if the home has a holding tank or well the financing institution will likely want a potable test or well testing to show the water is safe.
As an example, let’s say an average home in the nearest town is selling for $400,000. You want to purchase an acreage with an average home, a shop, garage, and barn on 80 acres with 10% down. Once the application is submitted to the lender, typically the insurer will order and appraisal for the property. There is no cost to you when an insurer orders an appraisal.
If the property is being purchases for $450,000 and the appraisal report shows that the home, garage and 10 acres are worth $450,000 your down payment will remain at 10%. However if the home was listed at $500,000 and the appraisal value was $450,000 you would have to cover the $50,000 discrepancy because the insurer and lender will not finance the value of the extra land and outbuildings. In a situation like this you could negotiate with the seller to get the purchase price closer to appraised value and/or pay the amount not included in the value along with your down payment.
Acreages (a home on a lot larger than 1 acre) are not to be confused with working farms. A working farm (generating revenue and conducting business activity) generally falls under commercial lending or Farm Credit and is financed differently than a residential acreage which you would own to have a few pets for pleasure such as horses or a garden for your personal consumption. Call Whalen Mortgages today your Trusted Fort McMurray Mortgage Brokers. 780-715-7533.