Buying a home on leased land can offer affordability and location benefits, but it also comes with unique mortgage challenges. In Ontario, finding financing for leased land properties isn’t as straightforward as purchasing freehold real estate. Whether you’re buying your first home, refinancing a current mortgage, or exploring cottage living, understanding how leased land mortgages work is critical.
Mortgages for leased land in Ontario are available, but fewer lenders offer them. Institutional lenders often avoid these properties, especially for refinancing. Private lenders and local credit unions are your most likely options. Key factors include the lease agreement, remaining lease life, and the structure’s condition.
What Is Leased Land in Ontario?
Freehold vs. Leasehold Ownership
- Freehold: You own the land and the structure.
- Leasehold (Leased Land): You only own the structure; the land is rented.
Where Leased Land Is Common in Ontario
- Retirement communities
- Modular or mobile home parks
- Seasonal cottages (e.g., Wasaga Beach)
- First Nations communities
Key takeaway: With leased land, your mortgage is secured only against the building, not the land—creating more risk for lenders.
How Do Leased Land Mortgages Work?
What Lenders Look At
- Lease term remaining (must often exceed mortgage term)
- Lease transferability and renewal options
- Appraisal of the structure
- Lease agreement terms
Lease Life Matters
- Most lenders require 20–25 years remaining on the lease.
- Leases under 20 years may be ineligible for traditional mortgage financing.
Common myth: All banks finance leased land properties—they don’t.
Important to note: If you’re refinancing, many institutional lenders will not consider the file. You may need to turn to a private lender or local credit union familiar with the area and land lease community.
Who Finances Leased Land Mortgages in Ontario?
Banks and Credit Unions
- Some credit unions, especially local ones, may finance leased land purchases.
- Most major banks avoid leasehold mortgages due to title limitations.
Private Lenders for Leased Land
- Private lenders can be more flexible.
- They assess the equity in the home and the remaining lease term.
Common mistake: Assuming your existing bank will refinance your leased land home—it may not.
Key takeaway: If you’re refinancing or your lease term is under 25 years, private lending may be your only viable path.
Pros and Cons of Buying on Leased Land
| Feature | Leased Land | Freehold Land |
|---|---|---|
| Land Ownership | Leased (not owned) | Owned outright |
| Mortgage Options | Limited, higher scrutiny | Broad lender access |
| Resale Potential | Can be harder to sell | Easier resale |
| Purchase Price | Often lower upfront | Higher overall cost |
| Lease Payment | Yes (monthly/annual fees) | No |
Legal and Financial Considerations
Understanding the Lease Agreement
- Know lease length, renewal rights, payment structure, and termination clauses.
Risks of Short Lease Terms
- If the lease expires before the mortgage term ends, refinancing or selling becomes difficult.
Important to note: Many lenders want to see a lease that extends at least 5 years past the mortgage maturity date.
Tips for Getting Approved for a Leased Land Mortgage
Checklist: What You Need
- Lease agreement with 20–25+ years remaining
- Strong credit (especially if seeking institutional lending)
- Higher down payment (often 20% or more)
- Appraisal of structure only
- Private lender or credit union willing to lend
Key takeaway: Success depends on the lease terms, your equity, and the lender’s policies.
Final Thoughts: Is a Leased Land Mortgage Right for You?
Buying or refinancing a home on leased land can make homeownership possible when freehold prices are out of reach. However, lender options are limited, especially when refinancing. Private lenders and local credit unions may be the most reliable paths forward.
If you’re considering a leased land mortgage in Ontario, consult with a mortgage professional who understands the leasehold landscape and can help you find the right financing.
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