You can borrow to buy vacant land in Canada, but a land loan works differently from a home mortgage: the down payment is larger, mortgage default insurance isn’t available, fewer lenders offer it, and the rate is usually higher. How much a lender will lend depends mostly on what kind of land it is and how soon you’ll build on it. This page covers land financing; choosing and buying the land itself (zoning, services, surveys and provincial rules) is covered in buying land in Canada. It is part of our guides to lenders, brokers and special situations.
How a land loan differs from a home mortgage
| Feature | Vacant land loan | Home mortgage |
|---|---|---|
| Minimum down payment | Usually 20% to 50%, by land type | As low as the federal minimum (below) |
| Mortgage default insurance | Not available for vacant land | Required with less than 20% down |
| Rate | Usually higher than a home mortgage | See current mortgage rates |
| Lenders | Fewer; many banks finance only serviced, buildable lots | Widely available |
| Appraisal | Required, and harder for raw land with few comparable sales | Standard |
| Term | Often short | Commonly 1 to 10 years |
For a home, The minimum down payment is 5% of the first $500,000 and 10% of the rest for homes under $1.5 million, and 20% at $1.5 million or more. Default insurance, explained in what CMHC insurance is, covers homes, which is why land needs a much larger down payment.
Down payments by land type
Lenders set their own minimums. These ranges are typical rather than rules:
| Land type | Typical down payment | Who usually lends |
|---|---|---|
| Serviced urban or suburban lot | 20% to 25% | Banks, credit unions |
| Rural lot with road access | 25% to 35% | Credit unions, some banks |
| Rural lot needing a well and septic | 25% to 35% | Credit unions, some banks |
| Waterfront lot | 25% to 35% | Credit unions, some banks |
| Recreational or seasonal land | 25% to 50% | Credit unions, private lenders |
| Raw land with no services | 35% to 50% | Credit unions, private lenders |
| Agricultural land | 25% or more | Farm Credit Canada, credit unions |
Who lends on land
- Banks usually lend on serviced, buildable lots, often with a plan to build, and are more cautious about raw or remote land. Policies vary by lender and region, so it’s worth asking a lender or broker before you make an offer.
- Credit unions know their local land markets and are often more flexible on rural, recreational and waterfront lots. Lenders in each region are compared in the best mortgage lenders in Canada.
- Farm Credit Canada finances farmland and agricultural operations, not speculative or urban lots.
- Private lenders finance land others won’t, for short terms at higher rates and with lender fees, which works only with a clear plan to refinance or sell. See private mortgage lenders.
Ways to finance a land purchase
A combined lot and construction mortgage
One approval covers the land and the build, with the funds advanced in draws as construction progresses. Lenders usually want the plans, a builder and a budget ready, and base the down payment on the total project cost. It suits buyers who plan to build soon after buying. How construction draws work, and what building costs, is covered in buying land and building a house and what it costs to build a house.
Buy the land first, then get a construction mortgage
Paying for the land from savings or home equity keeps the land purchase simple and leaves time to plan. A construction mortgage later is based on the land plus the planned home. The trade-off is that your capital is tied up in the land until then.
A HELOC on a home you own
Borrowing against your current home avoids a land-specific approval, at a variable rate and with your home as security. At a federally regulated lender, two limits apply: the revolving part of a HELOC can't exceed 65% of the home's value, and everything borrowed against the home (the mortgage plus the HELOC, or a refinanced mortgage) can't exceed 80% of its value. HELOC room is therefore the lower of 80% of the value minus the mortgage and 65% of the value. Mortgage insurance can't take a refinance above 80%, except a refinance to build secondary suites that takes no equity out. HELOCs are explained in the HELOC calculator.
Seller financing (vendor take-back)
The seller lends you part of the price and you pay the seller over an agreed term, often with a balloon payment at the end. It’s common for rural and recreational land where lenders are scarce. The rate, term and down payment are negotiated, and a lawyer should register the charge.
What lenders check
| Factor | What they look for |
|---|---|
| Zoning | That the land is zoned for your intended use |
| Road access | Legal, year-round access to a maintained road |
| Services | Municipal water and sewer, or a feasible well and septic system |
| Buildability | Soil, slope, flood and environmental limits on building |
| Location | How marketable the land is if the lender has to sell it |
| Appraised value | An independent appraisal of the land |
| Your finances | Credit, income and debt ratios, as for any mortgage (see the underwriting process) |
| Your building plans | A concrete plan to build makes lenders more comfortable |
GST/HST on land
Whether GST/HST applies depends on the seller: vacant land bought from an individual who wasn’t using it in a business is generally exempt, while a lot bought from a builder, developer or a business that subdivided it is generally taxable. A buyer who builds a home to live in may qualify for a rebate: see the GST/HST new housing rebate and, for rates by province, sales tax in Canada.
Before you apply
- Ask lenders about their land policies early, before you make an offer.
- Confirm zoning and road access, and get a soil test if you’ll need a septic system: a failed test can make a lot unbuildable.
- Budget for the whole project (servicing, permits, construction and sales tax), not only the land.
- Have building plans ready if you want construction financing.
- If you use a private lender, plan the refinance before you sign.
Sources
The figures and rules on this page come from these sources, last checked against them on September 29, 2026. How we check facts.
- CMHC: CMHC Refinance for Building Secondary Suites
- Financial Consumer Agency of Canada: How much you need for a down payment
- Financial Consumer Agency of Canada: Home equity lines of credit
- Justice Laws (Canada): Bank Act
- Justice Laws (Canada): Eligible Mortgage Loan Regulations
- OSFI: Residential mortgage underwriting practices and procedures