Land Finance
Land Financing in Ontario: Securing Property in a Growing Market
If you are looking to invest, develop, or own undeveloped property in one of Canada’s most vibrant cities, land financing in Ontario can be a core strategy. Ontario continues to experience increased urban development in commercial, residential, and other real estate sectors. Therefore, if you are thinking of purchasing land in Ontario, it can be a profitable venture if properly evaluated and financially financed.
What is Land Financing?
Land financing is a loan or credit facility specifically for acquiring vacant or raw land. Unlike traditional mortgage loans, speciality land loans have higher interest rates and possibly stricter payment terms, as undeveloped land presents additional risk for lenders. Those risks include zoning issues or restrictions, and lack of infrastructure, or the ability to obtain a permit to construct.
Types of Land Loans Available in Ontario
- Raw Land Loans – Designed for land with no utilities or improvements. These loans are considered riskier and will typically require more cash upfront (sometimes, just above 50%).
- Improved Land Loans – For plots with some infrastructure in place, like roads and some utility access. Typically, improved land loans have better terms than raw loans.
- Construction Loans – If you plan on building soon after purchase, then some lenders offer “Construction-to-Permanent” loans that cover both land purchase and the construction itself.
- Private Financing – When traditional financial institutions won’t lend on the land package, private lenders might lend in Ontario, and offer more terms; however typically this option costs more.
Key Considerations Before Applying
- Zoning and Permits: Always search the zoning laws and permits of the area to know if your desired use will be attainable.
- Down Payment Requirements: Land loans usually are larger down payments, typically 25% – 50%, depending on the type of land and lender.
- Credit Worthiness: A nice credit history and proof of income are important, especially when dealing with banks or credit unions.
- Future Plan: Lenders will consider whether you are going to hold it as an investment or develop it when considering your likelihood for approval.
Why Ontario?
The combination of historical charm and modern growth power in Ontario makes it an exciting place for real estate investment. This is especially true in places like Griffintown, Pointe-Saint-Charles, and Ontario’s outer-skirt areas Lavals Greater metropolitan area is seeing an increase in demand for land making land financing a serious option for developers and real estate investors.
Land financing in Ontario is a strategic approach to leverage the city’s ever-changing real estate market. If done correctly, with planning, due diligence, and the right lender, land acquisitions can provide long-term success in one of Canada’s most vibrant cities.
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