Mortgage Financing for Vacant Lots & Raw Land in Alberta

Land loan options for vacant land, required down payment, terms and rates, and how to get started.

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Understanding How to Finance Raw Land or a Vacant Lot for Personal Use

You have found that dream parcel of land that is a perfect fit.

Land Subdivision

Now you want to acquire that land to build your dream home or vacation getaway;, perhaps building right away or perhaps later. Maybe you just want to leave the land as-is for hunting or camping.

This page is for for you if you are looking to acquire a vacant town lot, vacant lake lot, small  serviced or un-serviced vacant rural acreage, or other bare land (up to 160 acres) in Alberta intended only for your **residential use** (not commercial), whether to build a home now or to hold for future development.

A note of caution: acquiring vacant land is usually an initial step to a larger objective, that being developing the land with a residential home. It is important to understand whether you have what it takes to execute the entire development, not just the land acquisition part. To that end, we have developed a comprehensive Mortgage Financing Guide for Developing Vacant land, where we discuss your cash, experience, property and mortgage requirements.  

In the video below, we discuss the written content below in more detail.

Alberta Land Loan Program - Key Features

This financing is for acquiring vacant lots, lake lots, small acreage, or other bare land (up to 160 acres) in Alberta intended for residential/personal use. This includes land for immediate development or to hold for future development. We no longer provide guidance for land purchase in other provinces.

Borrower Qualifications

  • Alberta resident
  • Personal borrowing only (no corporate borrowers)
  • Standard mortgage qualifying criteria. 

Eligible Loan Purpose

  • Purchase
  • Refinance 

Eligible Properties

  • Located in Alberta
  • Under 160 acres
  • Value of $75,000 or more.
  • Residential, country residential, or agricultural zoning
  • Personal use only (not for commercial use or a profit motive)
  • Preference to land without existing structures (exceptions possible)
  • With or without utility services


Down payments range from 20% to 50% based on land type and zoning.

  • Fully serviced city lot, with residential zoning require 20-30% down payment.
  • Fully serviced rural lot, with residential or country residential zoning: 30-40%
  • Partially-serviced rural lot with residential zoning: 35-50%
  • Raw land, residential or agricultural zoning: 35-50%
  • Farming: 20-25% (Contact Farm Credit Canada)
  • There are no lower down payment options for vacant land, sorry.

What are the typical interest rates and terms for land loans?

Interest rates are typically relative to the Bank Prime Rate:
  • Serviced lots: Prime +1% to Prime +4%. Prime plus 2% is typical.
  • Raw land: Prime +2% to Prime +7%. Prime plus 2% is typical.
  • Open rate (Open means no penalty to discharge) 
  • Fixed closed rates (upon request, suitable for longer hold periods, penalty to break)
  • Amortization between 20 to 25 years
  • No immediate building plans required.
  • Most provinces have the same rates & terms.

What transaction fees should I expect?

  • Appraisal Fee: $350 for town, $400-$650 for rural areas (depends on commute)
  • Legal Fees: $1200-$1500
  • Brokerage Fee: 1% of the loan amount, with a  $1500 minimum.
  • Land Transfer Tax: 0% (there is no land transfer tax in Alberta)
  • GST may apply when purchasing from a developer or a farmer. When negotiating price, always make sure that the price includes any applicable GST.

 

Frequently Asked Questions

Why are down payments for vacant land higher than for residential properties?

Lenders consider undeveloped land loans riskier due to lower resale opportunities and potential zoning changes. The higher down payments help mitigate these risks.

What strategies can I use if I don't have enough down payment?

  • Buy land or lot with a home on it instead: It is much easier to finance an existing home and the down payment is much lower.
  • Home Equity Loan: Borrow against the equity in your existing home. Here is a link to a blog that I wrote on how to use home equity (if you have any) to acquire vacant land or to fund the down payment
  • Personal Loan: Ask your bank about personal or unsecured lending based on your credit score and employment.
  • Vendor Financing: Negotiate a loan with the property seller instead.
  • Lease the land with an Option to Purchase: Lease the land with the right to buy it later. Add a manufactured home and services, then purchase it using a residential home financing instead.

How can I lower the interest rate?

A cheaper way to finance land is to refinance another residential property that you already own via a process called Equity-Take-Out.  Then use the ETO proceeds to pay cash for the vacant land.  Our favourite tool for this is a RELOC or Re-advanceable Equity Line of Credit

Can I combine land purchase with a construction mortgage?

Yes, if your land purchase is from a developer and bundled with a builder contract and construction mortgage, you may qualify for a less expensive amortizing mortgage, lower down payment, and at normal discounted rates.

What should I know about appraisal requirements for land loans?

An appraisal is most always required by the lender, and no value is given to existing structures on the land. The appraisal is typically ordered after the land loan has been conditionally-approved, by us and at the borrower's expense.

Do you arrange land loans in other provinces besides Alberta?

Sorry, we have discontinued offering that service. Please consult a mortgage professional licensed for vacant land loans in your province.

What is the process for getting started with a land loan?

First, identify your likely down payment requirement based on the type of land. Ensure you have sufficient down payment or existing home equity. Then, please consult with us to discuss your specific situation and financing options. Use the form below to get started.

Vacant Land & Lot Lending - Next Steps

natural-land-800Lets get Started button in red 150x150To accurately answer your mortgage questions regarding vacant land, we need some basic information about you, where you are located, and your objectives. We call this "context." Vacant land lending varies by region and property characteristics; some will apply and some won't depending on the property **and** your financial situation. The goal is to find the options that you do have, what we like to call the "sweet spot!"

We will review your submission and get back to you with advice and available options based on the information you provide.

All information is strictly confidential and reviewed by our licensed mortgage brokers. (*indicates a required field).

Let's Get Started - tell us a little about your situation and needs.