Purchasing acreage in the country provides you with land that offers scenic surroundings, a peaceful environment and other benefits. When you’re looking into acreage for sale in BC, it’s important to be familiar with mortgage types. Buying rural land involves taking out either a farm or acreage mortgage. Knowing the differences between these types of mortgages can help you understand what to expect during the purchasing process.
Intended Land Use
The way you’ll be using your land helps determine the kind of mortgage you’ll need. In general, acreage mortgages cover rural land that will be used for residential purposes. Farm mortgages cover land that will be used for farming or agricultural purposes. However, this distinction is not always as clear in certain areas, depending on municipal zoning rules. A “Country Residential” zoning rule typically does not allow land use for agricultural or commercial purposes, so buyers would need an acreage mortgage for this land. Zoning for “Agriculture” does allow land to be used for farming purposes or residential purposes, which can make the lending process a bit trickier.
The size of the rural acreage you plan to purchase also factors into which type of mortgage you will need. In zones that allow farming, for example, lenders might restrict the size of the land or its value for residential acreage mortgages. For example, you might be restricted to purchasing 10 acres or less for an acreage mortgage. This means that buyers would have less land available for growing crops, raising livestock or doing other agricultural activities that they could make money on.
Acreage vs Farm Mortgage Down Payments
The down payment for a farm or acreage mortgage can differ considerably. Buyers often need a minimum of 25 percent for a down payment with farm mortgages. Buyers who are purchasing acreage for residential purposes might only need to have a 5 percent down payment, depending on the price of the land. In general, this applies to acreage with a price under one million dollars. Keep in mind that there are certain rules buyers must meet in order to qualify for an acreage mortgage with a 5 percent down payment, such as the house being in good condition. Acreages with a price over one million dollars typically need a down payment of 20 percent or higher.
Water Quality and Septic Systems
Having potable water and a septic system that is correctly installed and in good working condition are factors that can affect acreage mortgage approval. A faulty septic system or a lack of potable water are considered risks for mortgage lenders. When purchasing rural land with an acreage mortgage, you might need to provide paperwork that addresses these issues, such as a septic certificate and water potability certificate.
Contact Us About Acreage for Sale in BC
If you’re looking into purchasing acreage in BC, please contact Cascadia Pacific Realty. We can assist you with finding and buying acreage that suits your needs.