Want to buy a farm but falling short of funds? Buying a farmland differs from buying a vacant residential land and often comes with more requirements and eligibility criteria. A specialist farm mortgage broker in Abbotsford, Edmonton, and Surrey, who has years of industry experience better understands the ins and outs of a farm mortgage and can get you approved in no time.
Farm mortgages were introduced to fund the acquisition of a farm or agricultural land, and differ slightly from traditional residential mortgages. Many banks and private lenders are eligible for providing farm mortgages in Canada.
Requirements for Farm Mortgages
Compared to standard mortgages for residential and commercial properties, farm mortgages require a more advanced approval criteria to determine whether a borrower is financially stable enough to pay back the loan. Some of the requirements include:
- Down Payment
A farm mortgage requires a larger down payment than a regular residential mortgage. Generally, at least 25% of the purchase price may be required. This is because the lender takes a higher risk on borrowers who intend to utilize the land for farming. After all, financing a working farm operation requires far more time, money, and resources than financing a conventional living property.
- Credit Score
Just like other mortgage requirements, farm mortgage approval also necessitates a good credit score. Lenders generally consider a borrower’s credit score to mitigate the repayment risk. A credit score of at least 660 is required for farm mortgages, however some lenders may set a higher score requirement.
There are some alternative private lenders who may be ready to approve your farm mortgage at a lower credit score, based on other criteria such as income and cash flow from farms.
- Financial Health
Generally a lender considers a variety of financial factors when approving a farm loan in Abbotsford, Edmonton, and Surrey, including:
- Your income: Make sure you are able demonstrate enough income sufficient to meet your farm loan payments.
- Your cash flow: Lenders will consider your farm revenue and the seasonal income to predict the cash flow you’ll generate from the farmland.
- Your debt: Lenders will want to ensure that the income you have left over after paying off your present debts is sufficient to cover payments on your new farm mortgage. Lenders will want to know how much debt you have in comparison to how much money you make.
Once you are able to meet the eligibility criteria, you can decide which type of farm mortgage you want to apply. The two types of loans available to buy farmlands are short-term and long-term. The option you choose will be determined by your personal needs and goals, as well as the lender’s offerings.
If you are looking for a reliable mortgage broker in Abbotsford, Edmonton and Surrey to meet your farm mortgage needs, rely on none other than Sandhu & Sran Mortgages. With years of experience and a team of expert brokers by our side, we are readily helping more and more borrowers in becoming proud farm owners. For more details, give us a call today.