Mortgage Financing for Raw Land in British Columbia
Raw Land Purchase – British Columbia
Buying raw land in British Columbia can be a great investment opportunity.
However, financing this type of purchase can be different than financing a regular home purchase.
In this blog, we will discuss mortgage financing for raw land in British Columbia, the differences between serviced and unserviced land, and the process of building a new home with a construction builder’s mortgage.
Financing Raw Land in British Columbia
In British Columbia, raw land is typically more challenging to finance than a residential property.
Traditional mortgage lenders may not all offer financing for raw land purchases. However, lenders like Interior Savings and Kootenay Savings Credit Union will provide loans on the raw land with a minimum 25% down payment. Larger banks like ScotiaBank will also lend on raw land but may require a higher down payment.
Another option is to obtain a loan through a private lender. Private lenders offer loans that are secured by the land, same as any land loan. These loans will have higher interest rates and shorter terms than traditional mortgages.
If you already own a home and have built some equity, you could use your Home Equity Line of Credit to purchase your land.
A third option is to work with a lender who specializes in financing raw land. These lenders will have experience in underwriting these types of loans and may be able to offer more flexible terms.
Serviced vs. Unserviced Land
When purchasing raw land, there are two types: serviced and unserviced land.
Serviced land refers to land that has access to public utilities, such as water, sewer, and electricity. This type of land is typically more expensive than unserviced land.
Unserviced land does not have access to public utilities. Buyers will need to install these services themselves. This type of land is typically less expensive than serviced land.
Building a New Home with a Construction Builder’s Mortgage
If you are purchasing raw land with the intention of building a new home, you may need a construction builder’s mortgage. This type of loan provides financing for both the land purchase and the construction of the new home.
The process of obtaining a construction builder’s mortgage is similar to that of a traditional mortgage. However, the lender will require additional information, such as building plans, construction contracts, and a timeline for completion.
The lender will typically release funds in stages as the construction progresses. This is known as a draw schedule. The builder will submit invoices for completed work, and the lender will release funds to cover the costs.
Conclusions and Further Thoughts
Financing raw land in British Columbia can be challenging, but it is not impossible. Traditional lenders, private lenders, home equity loans, and specialty lenders are all options for financing the purchase of raw land. When purchasing raw land, buyers should be aware of the differences between serviced and unserviced land.
If you are building a new home on raw land, a construction builder’s mortgage may be necessary. The lender will release funds in stages as the construction progresses, and the builder will submit invoices for completed work.
As always, it is essential to work with a knowledgeable and experienced mortgage broker like Huber Mortgage to ensure that you are getting the best possible financing for your raw land purchase.
Huber Mortgage has successfully funded files for raw land as well as construction mortgages. Call us to find out how you can qualify!
Sincerely,
Michael
PS – One of my hobbies is blogging about mortgages, debt and government policy. During the day I’m a MORTGAGE BROKER in Kelowna, BC!
Check out the Huber Mortgage Home Buyers Guide HERE
