Agricultural Property Mortgages

Financing agricultural properties, while not uncommon, come with their own unique set of challenges.

Despite this, there’s no denying that more and more people are seeing the allure of an agricultural property.  And they’re making the move from large city centres to a more quiet, rural lifestyle.

If you’re working with a borrower who wishes to purchase agricultural property that is zoned or currently used as such, there are mortgage options with MIC’s and private lenders.

Legally speaking, there is actually no difference between the security a lender takes over agricultural land and regular residential land.

There is however, one large challenge for the lender to consider… 

It lies in the layers of farm protection legislation that has been enacted both federally and provincially.  This legislation’s effect creates a situation where it is much more difficult to foreclose on agricultural properties.

This is why many lenders often avoid them.

Now, this does not mean the borrower is out of luck and their dreams of rural living will be dashed.

Here are a couple of considerations that can make a difference to your lender:

• How a borrower earns their income will matter in the case of financing agriculture land. If the borrower earns their income from farming their property instead of from a traditional job this can create a potential issue for the lender.  Whereas if a borrower maintains a traditional job and just happens to live on a large parcel of land, this can offer more security in the eyes of the lender.
• How the property is zoned and how it is being used. Land zoned for farming can make foreclosing on the property more difficult for the lender.
• If animals or livestock are involved and the property looks more like a farm than a residential acreage, this can potentially create an issue for some lenders as well.

Basically, if the lender can plan a clear exit strategy should the mortgage go into a foreclosure, the deal is more likely to get traction.   Gather as much information as possible from your clients before you present the file to your lender.  This way they can provide the most clarity for you and your borrowers.