Acreage Mortgages: Why Your Pre-Approval Won't Work on Farm Properties

Banks only lend against 5 acres—even if you're buying 50. Learn how acreage financing really works, what down payment you'll need, and which lenders actually fund rural properties in Canada.

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Acreage Mortgages: Why Your Pre-Approval Won't Work on Farm Properties

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Here’s something that catches buyers off guard every single week: that mortgage pre-approval you got for a standard house? It’s basically useless for acreage.

I’ve seen investors fall in love with a beautiful 20-acre property, make an offer, and then discover they need $150,000 more than they budgeted. The deal dies. They’re crushed. And it was completely avoidable.

When you’re buying property with significant land—farms, rural acreages, anything with agricultural zoning—the financing rules change dramatically. Let me show you exactly how acreage financing works so you don’t get blindsided.

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Why Banks Get Nervous About Acreage Properties

Here’s the rule that surprises everyone: most conventional lenders only count about five acres when calculating your mortgage amount.

Read that again.

You might be buying 25 acres. But the lender is only valuing—for lending purposes—the five acres immediately around the house. Those other 20 acres? They won’t lend a single dollar against them.

Why do banks do this? Risk.

Farmland values swing wildly based on commodity prices, water rights, and agricultural economics that nobody can predict. A semi-detached in Mississauga has comparable sales on every street. Twenty acres of farmland outside Red Deer? That’s a completely different animal.

The bank’s logic is simple: if you default and they have to sell, they know what a house is worth. They have no idea what that back forty will fetch.

Some specialized lenders will go up to 10 acres. A handful might go higher. But finding institutions willing to lend against your full acreage requires working with mortgage professionals who actually know this niche—not your cousin’s guy who does refis in Brampton.

Property Size	How Lenders Treat It	Typical Down Payment
Under 5 acres	Standard residential valuation	20% for investment properties
5-10 acres	Partial acreage valuation	25-35%
10-25 acres	Limited acreage or farm evaluation	30-40%
25+ acres	Farm program or commercial only	35-50% depending on use

The Math That Kills Deals

Let me show you exactly how this plays out with real numbers.

You find a property listed at $600,000—a solid house on 15 acres outside Kingston. You’re thinking 20% down, so $120,000. Standard investment math.

Wrong.

The lender sends out an appraiser. They value the house plus five acres at $400,000. The remaining 10 acres? Doesn’t exist as far as your mortgage is concerned.

The bank offers 80% of $400,000. That’s a $320,000 mortgage.

Your purchase price is $600,000. Your mortgage is $320,000. You need $280,000 cash to close.

That’s more than double what you budgeted.

This is why acreage deals fall apart constantly. Buyers discover the financing gap two weeks before closing. The deposit is at risk. The seller is furious. Everyone loses.

Don’t be that buyer.

Private lending opens doors that traditional banks won’t — book a free strategy call with LendCity to find out what private and alternative financing options are available to you.

Four Ways to Finance Larger Properties

When standard residential financing slams the door, you’ve got options. Here’s what actually works:

Agricultural Lending Programs

If you’re planning actual farming operations—not just living rurally—agricultural lenders evaluate your property completely differently. They care about income-generating potential, not just comparable home sales.

Farm Credit Canada (FCC) is the big player here. They understand that a 100-acre grain operation isn’t the same as a subdivision lot. Provincial agricultural lenders also serve this market with programs designed specifically for working farms.

The catch? You need a real farming operation or a solid business plan for one. Buying acreage to build your dream hobby farm workshop? That’s not what these programs are for.

Commercial Lending

Commercial lenders treat your property like a business asset. They focus on what the property can produce, not what the house next door sold for.

Expect more paperwork. Expect slightly higher rates—typically 0.5-1% above residential in the current market where prime sits around 5.45%. But commercial loans can finance properties that residential lenders won’t touch.

If you’re buying acreage as an investment—maybe you’ll lease the farmland, build rental cabins, or develop it later—commercial lending often makes more sense anyway.

Private Lending

Private lenders set their own rules. When they’re comfortable with the asset and your qualifications, they’ll lend against full property values that banks won’t consider.

You’ll pay premium rates for this flexibility—think 8-12% in the current environment. But for investors who need to close quickly or have unique situations, private lending fills gaps that nothing else can.

Use it strategically. Close with private money, then refinance into conventional financing once you’ve got the property stabilized.

Seller Financing

Sometimes the best bank is the person selling you the property.

Seller financing means the seller carries the mortgage instead of requiring full payment at closing. They get monthly payments (often at attractive rates compared to GICs), and you get financing that no bank would provide.

This works best when:

The seller owns the property free and clear
They’re motivated to sell but not desperate for cash
You can make a substantial down payment to give them security

Terms are fully negotiable. I’ve seen seller financing deals at 5% over 10 years, and I’ve seen them at 8% over 3 years. It depends on what both parties need.

Have a real estate lawyer review any seller financing agreement. This isn’t a handshake deal.

You Need a Specialist (Not Your Regular Mortgage Broker)

Here’s my direct advice: do not try to figure this out yourself.

You need a mortgage broker who specializes in acreage and agricultural properties. Someone who knows which lenders serve this market, what they require, and how to structure your application for the best results.

Your first conversation should cover:

Exactly what type of property you’re targeting
How much acreage you need
What you plan to do with it (residence, farm, investment, development)
Your timeline and capital position

This information shapes everything. A 10-acre hobby farm finances differently than a 40-acre working operation. A rural residence with extra land finances differently than raw land you’ll develop.

Get pre-approval that specifically addresses acreage. A standard residential pre-approval letter is worthless for these purchases. You need confirmation that your lender will actually finance the type of property you want to buy, at the acreage you’re targeting.

When the banks say no, private lenders often say yes — schedule a free strategy session with us and we’ll walk you through the costs, terms, and trade-offs.

How to Prepare Before You Start Shopping

Save More Than You Think You Need

If you’re targeting properties over 5 acres, budget for 25-40% down. Not 20%.

Yes, that’s a lot more capital. Yes, it takes longer to accumulate. But knowing the real number now beats discovering a $100,000 shortfall when you’ve already found the perfect property.

Research Your Target Market’s Lenders

Different regions have different options. Alberta’s rural credit unions have extensive acreage experience. Ontario has several agricultural lenders beyond FCC. Quebec has unique programs through provincial institutions.

Know your options before you’re under time pressure. When you find the right property, you want to move fast—not start from scratch figuring out financing.

Understand How Property Features Affect Financing

Not all acreage is equal in a lender’s eyes:

Standard home on 8 acres: Easiest to finance
Unique or custom home on acreage: Harder (appraisal challenges)
Raw land with no structures: Hardest (50%+ down typically)
Agricultural zoning: Limits your lender options significantly
Multiple structures/outbuildings: Can help or hurt depending on condition

Think carefully about which features matter most to you and how they’ll affect your financing options.

Get Your Documentation Together Early

Lenders for non-standard properties scrutinize borrower qualifications more carefully than standard residential lenders. Have ready:

Two years of tax returns (NOAs from CRA)
Income verification (T4s, pay stubs, or business financials)
Asset statements showing your down payment
Explanation of any credit blemishes
Business plan if you’re claiming agricultural use

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Frequently Asked Questions

Why do lenders only count five acres?

Pure risk management. Agricultural land values are volatile—they swing with commodity prices, water availability, and farming economics that banks can't predict. By limiting their exposure to the residential portion (the house and immediate land), lenders protect themselves from fluctuations they can't control. The house they understand. The back forty? That's anybody's guess.

Can I use farm income to qualify for a mortgage?

For agricultural lending programs designed for working farms—absolutely. Farm Credit Canada and provincial agricultural lenders specifically evaluate farming income potential. For standard residential mortgages from big banks? Usually not. If your property will generate farming income, you need to work with lenders who understand agricultural operations, not residential mortgage specialists.

What down payment should I expect for 20 acres?

Plan for 30-45%. Properties with standard homes and some agricultural use might qualify for the lower end. Raw land with no structures? You're looking at 40-50%. Your personal qualifications matter too—strong income, excellent credit, and significant assets can improve your terms. But don't budget for 20% and hope for the best. That's how deals die.

Are there programs for first-time farm buyers in Canada?

Yes, but they require real commitment to farming. Several provinces offer grants, favourable loan terms, and mentorship for new farmers. Programs vary by province—Alberta, Saskatchewan, and Ontario have particularly active support for beginning farmers. Check your provincial agriculture ministry's website. These programs want to see a legitimate business plan for agricultural operations, not just someone buying rural property for the lifestyle.

How do I find lenders who handle acreage?

Start with a mortgage broker experienced in rural and agricultural properties—they'll know who's active in your market. Rural credit unions often have more acreage experience than big banks focused on urban markets. Farm Credit Canada serves agricultural operations nationally. Some B-lenders and private lenders specialize in rural properties too. The key is finding someone who does this regularly, not a generalist figuring it out as they go.

Can I get a standard residential mortgage for property with agricultural zoning?

Generally, no. Agricultural zoning is a red flag for most residential lenders—it signals a non-standard property even if the house itself looks completely normal. Many A-lenders won't touch it at all. You'll likely need a lender experienced in rural properties or a specialized agricultural lending program. The zoning matters more than the actual property characteristics in many cases.

Is seller financing realistic for buying acreage?

More realistic than you might think—especially for acreage. Many sellers of rural properties have owned them for decades, own them free and clear, and aren't in a rush. Seller financing lets them earn better returns than a GIC while helping you bridge the financing gap that banks create. It's not common, but it's not rare either. Always have a real estate lawyer structure and review the agreement. This needs to be done properly with registered mortgages and clear terms.

The Real Talk on Acreage Investing

Buying acreage isn’t like buying a condo in Toronto. The financing is more complicated. The down payment requirements are higher. Your lender options are more limited.

But here’s what I’ve seen over and over: the investors who succeed with acreage purchases are the ones who understand these rules before they start shopping. They save more than they think they need. They work with specialists. They get proper pre-approval that reflects the properties they actually want to buy.

The investors who struggle? They’re the ones who assume standard financing applies, find a property they love, and discover three weeks before closing that they’re $150,000 short.

You now know more about acreage financing than 90% of buyers who attempt it. Use that knowledge. Start with realistic expectations. Build your team before you need them. And when you find that perfect property, you’ll actually be able to close on it.

Disclaimer: LendCity Mortgages is a licensed mortgage brokerage, and our team includes experienced real estate investors. While we are qualified to provide mortgage-related guidance, the broader financial, tax, and legal information in this article is provided for educational purposes only and does not constitute financial planning, tax, or legal advice. For matters outside mortgage financing, we recommend consulting a Chartered Professional Accountant (CPA), licensed financial planner, or qualified legal advisor.

Written by

LendCity

Published

February 3, 2026

Reading Time

8 min read