Skip to main content

If you’re on the hunt for a new home, you may find yourself considering buying in a land lease community. However, you may have heard that obtaining a mortgage for a land lease purchase can be difficult because the lease – 21 years less a day – is shorter than the typical 25-year amortization period for most mortgages.

Put your mind at ease, says Vicky Collins, mortgage specialist with RBC Royal Bank in Innisfil, ON.

“RBC will be able to assist you with your mortgage needs on these properties,” she says. “The standard lease agreement is 21 years less a day, which allows us to amortize over 16 years.”

“I don’t find it is a huge problem for many clients, just because they are usually at a stage in their life where they have more cash from the sale of a home and may not require a large mortgage.”

Here are the steps involved in securing a pre-approved mortgage for a land lease property:

  • Step 1 – Share your financial information with a mortgage specialist

This step is perhaps the most critical in the whole process, as it provides the mortgage specialist with the financial information they require to determine the size of the mortgage for which you can be pre-approved.

What do you need to provide?

For one, any documentation you have about your current finances, including your income and credit rating and whether you currently rent or own a home.

The mortgage specialist will also want to know the price range you are considering, as well as the potential cost of the monthly lease, which can vary from community to community.

“Lease fees become very important because it will be a big deciding factor in what they qualify for,” says Collins. “Say you have a $600 lease payment compared to an $800 lease payment, that’s a big difference on what they qualify for, mortgage-wise.”

Once all of the documentation is compiled, the mortgage specialist will complete an application for a pre-approved mortgage and approval can be provided to you within 24 hours.

  • Step 2 – Receive pre-approval for a mortgage

Once you are pre-approved for a mortgage, you will receive a letter from the mortgage specialist confirming the pre-approval. This gives you peace of mind that you have the money you need – and now you can go shopping!

  • Step 3 – Purchase your home and receive final mortgage approval

Your offer on a Parkbridge land lease home of your dreams has been accepted. What comes next?

The offer and its acceptance must be submitted to the mortgage specialist for final approval from the financial institution – a process that typically takes about 5 days. Collins says final approval has to take into account any conditions attached to the purchase, including the possible need for an appraisal.

She also notes that if the land lease home you are buying is considered “moveable” – that is, the home was manufactured elsewhere and then placed on a slab on the site – the mortgage must be insured by Canada Mortgage and Housing Corporation (CMHC), regardless of the size of the down payment. This is something that the financial institution can look after during the final approval process.

If the home was built onsite and not considered “moveable”, then the standards terms for a mortgage apply, and you would only require mortgage insurance if your down payment is less than 20 per cent.

These are the key steps involved in securing a pre-approved mortgage for a land lease property. Be sure to stay in close touch with your mortgage specialist while you enjoy the search for your perfect land lease home!

One Comment

Leave a Reply