Tips for financing the purchase of a lot or acreage

There are several options to consider when purchasing property to either build a house on now or to hold until doing something with it down the road.

For one, it is a little known fact that a mortgage can be placed on land that doesn’t have a structure on it.

Here are some other facts to consider:

• There are financial institutions that will allow you to purchase a lot or acreage with as little as 25 per cent down.

• It is possible to amortize the purchased of land over 25 years.

•Interest rates will vary, depending on the type and term of the mortgage but generally the rate is higher for a lot than for one with a house on it.

• Terms can be for interest payments only or blended monthly payments, depending on your intentions for future use of the property.

• It may be possible to purchase that prime lot and still own your home, as long as you qualify based on a financial institution’s credit rating guidelines.

• In most cases, the lot/acreage must have services such as power and sewer or have them readily accessible for hook-up nearby.

• When buying acreage, most financial institutions will base the value of the land on five acres, but there are some that allow the value to be based on 10 acres; again, in most cases the property must have services to the land

• Some fees from the lending institution may apply.

•  HST will be paid on the purchase value of the land.

• If you own a home and have sufficient equity built up, you can use that equity to qualify for the 25 per cent down payment or full amount of the lot purchase.

But again, we stress that everyone be aware of the opportunity to purchase raw land with a mortgage.

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