Michael & Ginny had done their time... years in University, then hard at it in their careers. Ginny had become pregnant and stepped out of the work force when Tyler was born. Mike continued working long days in the Calgary city core, up the corporate ladder, and making good money. But with the job came stress, fighting with traffic daily, and Tyler - the boy was growing up so fast...
Mike was just walking in the front door as Ginny smiled and nodded towards Tyler, finally fast asleep after an exhausting day. Mike and Ginny quietly ate supper, and as they cleaned up the dishes and caught up on the day, Ginny gently broached the topic that had been on her mind.
"Mike, let's move out to the country," she said. "Let's slow down and work on what really matters most." Mike put down the tea towel and carefuly met Ginny's intent gaze - she was serious. After a moment, he spoke. "I could teach Tyler to ride a pony," he smiled, the idea grabbing hold.
How Do You Finance an Acreage?
Both Mike and Ginny had grown up on farms in rural Saskatchewan before moving to Alberta. The farm was just "the farm" and they'd really never thought much about how their parents financed or bought them. Farms were a lot of work, they knew that much. But a small acreage, they could handle that. Now, how to get a mortgage - that's when they called me at my office.
As a mortgage broker, I explained to them that getting a small acreage mortgage is very similar to getting a mortgage on a house in the city, with just a few extra steps and considerations. I was glad they stopped to talk with me first, as certain properties are easier to finance if you know what to look for.
- Properties under 10 acres, especially ones that are zoned "country residential", have wide appeal to the majority of residential mortgage lenders, because they can't be turned into working farms, which have different lending rules.
- "Agriculture" zoned properties had less appeal, as foreclosure laws favour the farmer, not the lender, but they can still be financed especially the smaller ones.
- I explained that if the acreage was going to be used to generate income that that would enter the no-go zone for residential lending.
- Water from the well needs to be good and potable - I advised that any lender will require that it is tested to make sure!
- Septic systems can be very expensive to fix if they are broke.
- While technically you can buy an acreage with as little as 5% down, mortgage lenders won't provide mortgage money for buildings other than the house and garage, and ~10 acres. Doesn't mean you can't buy the property with a barn or shop, just that the lender will make you pay cash for that part. So that needs to factored into the down payment money available.
- If you find land without a home, or an old "knock-down" and want to build, that can be done, although quite tricky.
- Mobile homes, especially old ones, are tough to finance, and worse have poor resale.
- Finally, I explained that while Mike and Ginny could be pre-approved for lending, a property yet to be found could not! No worries, I told them, as mortgage brokers, it's our job to know which lenders will finance what, and offered to steer them along the way.
The take-away from our first meeting was to keep in touch as they began their search, and to send me MLS listings of the various acreages they were looking at and that I would provide ongoing feedback to help them narrow their search. We did a pre-approval based on their income/employment, credit rating, and available down payment, established their price range, and they were good to go.
As Mike and Ginny left my office, I could see them both smiling. Ginny gave Mike's hand a big squeeze. Life was about to change in a very great way!