Why Banks Are Conservative on Land
Most major banks in Canada will not finance raw land purchases, or if they do, they require 50%+ down payments and offer very short terms. The reason is simple: vacant land generates no income, is harder to appraise, and is considered a higher risk because the borrower’s plans (building, subdividing, holding) may not materialize.
This creates a frustrating situation for developers, investors, and even families who want to buy a lot and build later. The good news: there are real financing options available through alternative and private lenders.
Your Financing Options
There are several paths to financing a land purchase in BC, depending on the property type and your plans:
- Private Lenders: Most flexible option. Typically 25-35% down, rates from 9.99%-13.99%, terms of 1-2 years. Best for developers with a clear build or flip timeline.
- Credit Unions: Some BC credit unions like Vancity and BlueShore will finance serviced lots at 35% down with rates from 6.99%-8.99%.
- Farm Credit Canada: For agricultural land, FCC offers competitive rates (5.99%-7.99%) with longer amortizations.
- Vendor Take-Back (VTB): The seller carries part of the financing. This can be combined with a first mortgage to reduce your cash outlay.
- Cross-Collateral: Use equity in an existing property to secure the land purchase, often getting better rates.
The Exit Strategy Is Everything
Every land lender will ask: what is your exit strategy? This means how and when you plan to pay off or refinance the land mortgage. Common exit strategies include building on the land and refinancing into a construction mortgage, subdividing and selling lots, or rezoning and selling to a developer at a higher value.
Without a clear exit strategy, most lenders will decline your application. At E7 Mortgages, we help you build this strategy before we approach lenders, which dramatically improves your approval chances.
What You Need to Apply
To apply for land financing in BC, you will typically need the lot’s legal description and title search, a current appraisal, your personal financial statement and net worth, a clear description of your plans for the property, zoning confirmation from the municipality, and proof of funds for the down payment.
Let Us Help
E7 Mortgages has helped clients acquire development land, acreages, and serviced lots across BC. We know which lenders are active in land financing and how to structure your deal for approval. Call (778) 834-9618 for a free consultation.