So you're interested in a land lease...
Updated: Jan 14, 2020
Are you looking for affordable housing? Or are you looking for the benefits provided by living in an adult lifestyle community like Sandy Cove in Innisfil, Sutton-by-the-Lake in Georgina and Big Cedar Estates near Orillia? These places can appear very attractive due to the low purchase price and maintenance fees similar to condo fees. Many of these options involve purchasing a home and leasing the land, rather than owning it.
Should be straight forward, but there are a few things to consider. If you are selling a home and have enough equity after the sale to pay for the Home on the Leased Land outright… this is your best bet. Many retired people see this as a viable option, downsizing and joining a community with other like-minded people.
However, if you need to get financing, it could be a potential problem. Banks will not currently finance mortgages on land lease properties, even with a significant down payment. If you default on your mortgage, they cannot take back the land, only the structure, which may not be worth as much as you paid for it.
Credit Unions and other first tier lenders also struggle with it. And even the CMHC, Canadian Mortgage and Housing Corporation will not necessarily insure these high ratio mortgages. It can be a long and stressful experience.
This leaves you with having to try and find a private lender, which could mean that you will be paying a significantly higher interest rate.
Maintenance fees can also vary from park to park. Check into what these fees cover and how it will impact what you can pay each month. Often, parks can increase these fees when a new owner purchases a home. You can try and circumvent this by asking if the seller will assign the lease and the park may have to sign off on this as well.
Living in an Adult Lifestyle Community can be a great option and often there are amazing benefits like recreation centers, weekly events, beaches, pools, etc. If you are considering a Land Lease as an option, make sure to consult a Realtor with experience in these to help you with your future home purchase.