Agricultural & Acreage Mortgages: How to Finance Rural Properties Most Lenders Won't Touch
In this episode, Scott Dillingham explains why rural properties get declined and exactly how to find lenders who specialize in financing properties up to 10+ acres. The key to successfully financing an agriculturally…
Show notes
Acreage and agricultural properties are deal-killers for most lenders — but not for those who know the right programs. In this episode, Scott Dillingham explains why rural properties get declined and exactly how to find lenders who specialize in financing properties up to 10+ acres.
The key to successfully financing an agriculturally zoned property lies in understanding how lenders assess risk. When a borrower defaults on a mortgage, lenders need to repossess and sell the property to recover their funds. Properties zoned agricultural present a unique challenge because foreclosure timelines differ significantly from residential properties. For agricultural land, foreclosure processes in Canada typically require a full crop cycle waiting period of approximately 12 months, compared to just 3 months for standard residential foreclosures. This extended timeline increases lender risk and explains why many institutions decline these applications outright.
Scott explains that the property's physical surroundings play a critical role in financing approval. A single-family home that is wedged tightly between active farming operations with silos, barns, and agricultural equipment in close proximity will present the most difficulty for financing. However, properties that are simply zoned agricultural but situated with adequate space from intensive farming activity have significantly more financing options available. The distinction between agricultural zoning on paper versus actual agricultural use in practice is crucial for mortgage approval.
The episode also addresses acreage limitations and how they impact mortgage financing. Most residential lenders will finance properties with up to 10 acres without issue. Some lenders extend their policies to accommodate 15 acres or more, though options become progressively limited as acreage increases. For properties exceeding these thresholds, lenders typically value only the home and a portion of the land, requiring borrowers to fund the remaining acreage through additional down payment. This means a buyer purchasing a property with substantial land may need to bring significantly more cash to closing than anticipated, as the excess acreage value will not be included in the mortgage amount.
Scott emphasizes that being told agricultural zoning requires commercial financing is simply incorrect in many cases. Working with a mortgage professional who has access to multiple lenders specializing in rural and acreage properties can make the difference between approval and denial. LendCity maintains relationships with lenders across Canada who understand these unique property types and can structure financing solutions that work for buyers seeking rural properties with agricultural zoning or large acreage.
Key Takeaways
- Agricultural zoning alone does not automatically disqualify a property from residential mortgage financing, as many lenders evaluate intended use and property characteristics rather than zoning classification alone
- Properties surrounded closely by active farming operations including silos, barns, and agricultural equipment face the most significant financing challenges due to marketability concerns
- Most residential lenders will finance properties with up to 10 acres, with some extending to 15 acres or more, while properties exceeding lender acreage limits require additional down payment for excess land value
- Foreclosure timelines for agricultural properties typically require 12 months compared to 3 months for residential properties, which drives lender risk assessment and approval criteria
- Appraisers may exclude outbuildings, excess land, and agricultural improvements from property valuation when determining the mortgage amount a lender will approve
- Working with a mortgage broker who has access to specialized rural and acreage lenders is essential for finding financing solutions when mainstream lenders decline applications
Links to Show References
- LendCity Mortgages: lendcity.ca
- Contact LendCity for Rural Property Financing: Visit the website or call for a consultation on agriculturally zoned property mortgages
- (00:00) - Introduction to financing agriculturally zoned properties
- (00:03) - Understanding acreage limits and lender policies
- (00:20) - Working with lenders who specialize in rural properties
- (00:35) - Property surroundings and their impact on financing approval
- (00:43) - Closing thoughts and call to action
- (00:52) - Why agricultural zoning creates lender hesitation
- (00:59) - How excess land affects property valuation and down payment
Transcript
Introduction
Welcome to the Close More Deals podcast for realtors, the no BS podcast that turns stalled real estate deals into signed contracts and flaky buyers into loyal clients. I'm your host, Scott Dillingham, a battle-tested mortgage expert who's closed over $2B+ in real estate transactions. Each week, I unpack proven lending programs, negotiation hacks, mindset shifts, and insider tools from top producers so you can close faster, earn bigger, and crush your goals. Ready to dominate?
Hit play and let's seal the deal. Welcome to the Close More Deals podcast. I'm your host, Scott Dillingham. Today, I'm going to be telling you how to close those agriculturally zoned properties or properties with large acreage.
Meanwhile, it's a single family home. So what happens is the lenders, they have criteria where they need to follow specific zoning to determine if they're going to lend on a property or not. So traditionally, if it's a single family home and it's zoned agricultural, they don't like that. And the reason is, if you stem back and you go back, let's say, you know, you've lent this money to somebody, they can't pay the loan and you need to repossess the property.
A single family home zoned agricultural can be much harder than a property that's zoned residential. So they don't like it, they avoid it. Now I want to say not all the lenders dislike it. That's my point here.
The Core Idea
That's why we're discussing this. So you first need to find out a couple things. Whenever it's zoned agricultural, you want to look at the property and is it wedged? Is it a home that's wedged between multiple farms everywhere and close proximity?
If they're far away, it's different. But if they're like close proximity silos, like all this stuff, barns everywhere. And then there's just this house that, you know, the farmers couldn't buy the land 50 years ago. So they built their whole farm around you.
Like if it's something like that, it's going to be incredibly hard to finance. Not impossible, but those are the hardest. Okay. So if that's what it looks like, be careful.
Now, if it's just a regular property in the middle, you know, of the county, and there's lots of room around and there's not barns and, you know, other farm equipment and everything all surrounding your property, then there's multiple lenders that will move forward, even if the zoning is agricultural. Now, the next sort of piece to this, which goes hand in hand is the square footage of the property. So if it's under five acres, generally that's acceptable to all the lenders, like acreage wise, not the agricultural zoning.
Deep Dive
I'm just talking about the acreage. Um, we've got multiple lenders that will do 10 acres or below, and then we've got, you know, smaller amount that'll do 15 or below. And then above that, there's only just a couple and they're really farm lenders. Um, so we've got them, um, but it's not really the residential lender or what happens is let's pretend the lender will only, uh, value and work with 10 acres.
If the property is 100 acres, those 90 extra acres that are above the lender's policies, they're going to ask the appraiser to exclude from the valuation when they analyze the appraisal. So if you're buying this place, I don't know, let's just say it's $2 million with a hundred acres and a small house, they're going to look at what that land costs, right? So if the house in the first five acres or first 10 acres, depending on the lender's policy is a million, and then the 90 acres of land is also another million, they won't value that.
So your client has to come in with those extra down payments. So I just want you to kind of be aware of this. This is more of an education, but now we're going to tie it into, you know, how you close more deals. So the thing is, is if you have a lender who's telling you it's agriculturally zoned, you can't do it, that's a commercial mortgage.
That's not true. We have lenders that can do it. We can do it on the commercial side too, because we have multiple, but you don't need to. So if you're being told that from your lender, give us a call.
Practical Steps
We have the options Canada wide, and we can help you to close more deals. So I hope this helped. I hope it shared some insight into how kind of lenders look at deals. Um, and if it did, please share this with your, your coworkers, your fellow realtors.
And I look forward to seeing you next week. Take care.
Thank you so much for tuning into the show today. If you found value, please follow the show and rate it five stars. It would mean the world to me.
And lastly, all the resources that we spoke about are at the bottom of the show notes. Looking forward to seeing you on the next episode.