Residential Mortgages - Agricultural & Acreage Properties

In this episode of the Close More Deals Podcast, host Scott Dillingham breaks down one of the most misunderstood challenges in Canadian mortgage lending: financing properties with agricultural zoning or large acreage. Many borrowers and even some mortgage professionals assume that if a property is zoned agricultural, it automatically requires a commercial mortgage or cannot be financed at all. Scott debunks this myth and reveals that multiple residential lenders across Canada will finance these properties when they meet certain criteria.

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.

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