Thinking About Buying Vacant Land in Ontario? Here's What You Need to Know About Financing

We get this question a lot from realtors and buyers alike: "Can you help me finance vacant land?" The short answer is yes, but the reality is that financing empty land works very differently than financing a home. Let's talk about why, and what your options actually are.

Why Most Lenders Won't Touch Vacant Land

Here's the real answer: most lenders don't want to finance vacant land because they want a home on the property. It's that simple. A house makes the property more marketable and opens it up to way more potential buyers if something goes sideways with the loan. Empty land? That's a harder sell for them, literally.

Think about it from the lender's perspective. If they ever need to take the property back, they want something they can move quickly. A home attracts families, investors, first-time buyers. Vacant land? The buyer pool shrinks dramatically. And lenders are in the business of managing risk, not holding onto empty lots.

Your Best Option: Local Credit Unions

That said, there are options. Local credit unions and community banks are often your best bet for vacant land financing. These institutions know the local market, they understand the value of land in their area, and they're typically more flexible than the big banks.

Here's what you can typically expect: most credit unions will finance at least 50% of the purchase price. That means you'll need a significant down payment, often 50% or more. Some credit unions have special programs where this type of financing falls under their commercial lending side, which means the stress test requirements that apply to residential mortgages may not apply. That can actually work in your favor.

Buying Land to Build? Plan for Cash Upfront

If your plan is to buy vacant land and then build on it, here's the reality you need to prepare for: most people end up buying the land for cash.

Why? Because construction financing typically requires the land to be owned free and clear before a lender will even consider the project. On top of that, most construction lenders want to see about 30% of the total project cost sitting in savings as a buffer. That protects them from the inherent risks of construction projects, things like cost overruns, delays, or projects that stall midway.

Construction financing is a whole different beast. We've seen it work beautifully when people plan ahead, and we've seen it become painful when people don't realize what's involved until they're already knee-deep in architectural drawings.

Every Situation Is Different

Now, are there exceptions to everything I've just said? Absolutely. Every vacant land deal has its own unique circumstances. The location matters. The intended use matters. Your financial picture matters. Sometimes we find creative solutions that don't fit the typical mold.

But what I've outlined here represents what you should expect to see as fairly typical in Ontario. Going in with realistic expectations means fewer surprises and better planning.

The Bottom Line

If you're thinking about buying vacant land, whether as an investment, a future building site, or that dream cottage lot, the financing conversation needs to happen early. Not after you've fallen in love with a property and made an offer.

Our advice is free, and we can help you understand exactly what's possible before you start your search. We work with 60+ lenders across Canada, including the local credit unions that specialize in this type of lending. Let's look at the whole picture together and figure out the best path forward for your situation.

Ready to explore your options? Never be too shy to call.

289-645-1568 | experts@laframboisemortgage.ca