If you are thinking of buying some real estate then you will likely need to seek out a mortgage so that you will be able to finance such a large investment. However, there are several different types of mortgages available to most Canadians, so you will need to determine which mortgage solution is right for you. Here, we will discuss some of the obstacles that you may come across while trying to obtain a rural mortgage as well as what obtaining a rural mortgage actually entails.
The Challenges of Obtaining a Rural Mortgage
The truth of the matter is trying to obtain a mortgage for rural acreage or property is actually more difficult than trying to obtain a mortgage for a conventional home in an urban area: This is because most lenders associate rural properties with more risk, which means they will be more difficult to obtain. The two main reasons why rural mortgages are seen as riskier is because rural mortgages do not usually require a large down payment, as is often the case for a home in the city.
As a result, most of the financial burden actually lies in the hands of the lender instead of the borrower. Rural properties are also, in general, much harder to resell than urban properties. As a result, if the borrower is unable to make their mortgage payments then the lender will need to not only repossess the property but will also have to try and resell it themselves. Due to the fact that rural properties are located in remote areas, they will take much longer to sell, which puts increased stress and burden on the lenders front.
How to Bypass Some of the Issues With Rural Mortgages
Given the added risk, rural mortgages tend to cost more than urban mortgages. However, one way to avoid paying more than needed is to bypass any gratuitous clauses in the contract that will increase the cost of your mortgage. For instance, some lenders will charge egregiously high fees to simply process the application documentation, so shop around in order to find a private lender or bank that charges low fees, and always read the fine print before you sign.
Fixed vs Variable Rural Mortgage
A fixed rural mortgage would be preferred if you would prefer to have stability over the life of the mortgage, as the rate and payments you make each month will remain constant. However, a variable rural mortgage may be better if you feel that rates will drop in the not too distant future.
Also, some borrowers prefer variable rate mortgages because they tend to be lower than fixed-rate mortgages and because the rate is determined by the prime rate. If you would like to learn about mortgage closing costs in Toronto or require more rural mortgage tips and solutions then please visit our website or give us a call at 888-492-3690 for a free, no obligation consultation.