How to Get a Mortgage on Agricultural Zoned Property

So you found the perfect property. It’s got space, privacy, maybe a little land to breathe. There’s just one problem – it’s zoned agricultural. And now your lender is saying no.

Here’s the thing: that’s not the end of the story. Not by a long shot.

Why Lenders Get Nervous About Agricultural Zoning

Let’s talk about why banks and traditional lenders pump the brakes on these properties.

It comes down to risk. If a borrower stops paying their mortgage, the lender needs to repossess and sell that property. A single family home on agricultural land is harder to sell than one in a typical residential area. There’s a smaller pool of buyers, and the whole process gets complicated.

So most lenders just avoid them altogether. But not all lenders think this way.

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The Location Factor Matters More Than You Think

Before we get into solutions, let’s talk about what makes some agricultural properties easier to finance than others.

Picture this: a house completely surrounded by active farms. Silos everywhere. Barns on all sides. The farmer couldn’t buy your plot fifty years ago, so they just built around it.

That’s a tough one to finance. Not impossible, but tough.

Now picture a regular house sitting on county land. Plenty of space around it. No farm equipment in sight. Just a rural home with an agricultural zoning label.

That second scenario? Much easier to work with. Multiple lenders will consider it, even with the zoning issue.

The Acreage Question

Zoning is one piece of the puzzle. The size of the land is another.

Here’s how most lenders break it down:

Under 5 acres: Most lenders are comfortable with this
5 to 10 acres: Many lenders will still work with you
10 to 15 acres: Fewer options, but they exist
Above 15 acres: You’re looking at specialized farm lenders

Here’s where it gets interesting. Let’s say you’re buying a property with 100 acres for $2 million. The lender’s policy only covers 10 acres.

What happens? The appraiser excludes the extra 90 acres from the valuation. If the house and first 10 acres are worth $1 million, that’s what the lender works with. The other million? That comes out of your pocket as extra down payment.

The “Commercial Mortgage” Myth

Here’s something that frustrates a lot of buyers. They get told: “Sorry, this is agricultural zoning. You need a commercial mortgage.”

That’s not always true.

Yes, commercial options exist for these properties. But you don’t necessarily need them. There are residential lenders across Canada who will finance agricultural-zoned properties, especially if the property itself is actually a home.

The key is knowing which lenders to approach.

What You Can Do Right Now

If you’re looking at an agricultural-zoned property, here’s your game plan:

Check the Surroundings

Walk around. Look at what’s nearby. Is it truly a farm setting, or just a rural home with an old zoning classification? This affects your options.

Know Your Acreage

Get the exact lot size. This determines which lenders will even consider your file. The smaller the acreage, the more options you have.

Get Pre-Approved the Right Way

Don’t just get pre-approved with any lender. Work with a mortgage broker who has access to lenders that actually handle these types of properties. A big bank might say no while another lender says yes the same day.

Budget for the Unexpected

If your property has large acreage, be ready to bring extra funds. That land value above the lender’s limit needs to come from somewhere.

Don’t Let One “No” Stop You

The mortgage industry is full of niche situations. Agricultural zoning is one of them. Just because one lender turns you down doesn’t mean they all will.

Working with a broker who understands rural properties and agricultural zoning gives you access to the lenders who actually want this business. They exist. They’re lending right now. You just need to find them.

That dream property with the space and the view and the privacy? It might be more achievable than you think. Don’t give up on it just because someone said no.

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Frequently Asked Questions

Can I get a regular mortgage on agricultural zoned land in Canada?

Yes, many lenders will finance single family homes on agricultural zoned land. The key is working with a mortgage broker who has access to lenders that specialize in these properties.

Why do some lenders refuse to finance agricultural properties?

Lenders worry about resale difficulty. If a borrower defaults, a home on agricultural land can be harder to sell than a typical residential property, which creates risk for the lender.

Does the size of my property affect mortgage approval?

Absolutely. Properties under 5 acres have the most lending options. As acreage increases, fewer lenders will participate. Above 15 acres, you typically need specialized farm lenders.

What happens if my property has more acreage than the lender allows?

The lender will exclude the excess land from the property valuation. You'll need to cover that difference with additional down payment funds.

Is a commercial mortgage required for agricultural zoned residential properties?

Not always. While commercial options exist, many residential lenders will finance a home on agricultural land. You don't automatically need commercial financing.

What makes an agricultural property harder to finance?

Properties surrounded by active farms with silos, barns, and farm equipment are harder to finance than rural homes that simply have an agricultural zoning label.

Should I work with a mortgage broker for agricultural property financing?

Yes, a broker with experience in rural properties can connect you with lenders who specifically handle agricultural zoning, giving you options a single bank might not offer.

Can investors buy agricultural zoned properties for rentals?

Yes, investors can purchase these properties. The same lending considerations apply – zoning, acreage limits, and property surroundings all factor into approval.

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

December 29, 2025