The client
A family buying a $95,000 vacant rural lot near Steinbach, Manitoba, ahead of a $310,000 build. Combined income $8,000/month, both salaried.
Borrowers
Combined income $8,000/month
Both salaried
Lot
$95,000 vacant rural lot
Purchased ahead of the build
Build
$310,000 hard-construction cost
Excludes the land
Other debt
$300/mo
Other monthly debt payment
The assumption
5% down, like a regular home
Not how raw-land lending actually works
The problem
Buying the land is its own transaction, months ahead of the construction mortgage, and it doesn't follow the ordinary purchase down-payment tiers at all. Vacant, unimproved land is a different lending risk to most mainstream lenders, and it carries a materially lower maximum loan-to-value.
What the family assumed, and what the lot actually required
- ▸Assumed down payment, treating the lot like a regular home purchase: $4,750 (5% of $95,000)
- ▸Actual down payment required, at this lender's 75% maximum loan-to-value on raw land: $23,750
- ▸The gap: $19,000 — cash the family had not planned to have ready before a single footing was poured
None of this is a regulated figure the way a home purchase's minimum down payment is — raw-land loan-to-value ceilings are set by each lender's own policy, and they vary. What doesn't vary is that they are almost always lower than a standard home purchase, which is exactly the gap that catches families budgeting the land stage as if it were the house itself, one of several extra steps a rural purchase often needs that an in-town purchase doesn't.
The numbers
Two separate transactions, two separate sets of math: what the land required on its own, and what the combined project needed once construction began.
| The land purchase | Amount |
|---|---|
| Vacant lot purchase price | $95,000 |
| Land loan at 75% loan-to-value | $71,250 |
| Actual down payment required | $23,750 |
| Down payment the family had assumed (5% of the lot price) | $4,750 |
The $19,000 gap is the difference between a standard purchase down-payment tier, which does not apply to raw land, and the lender's own, lower loan-to-value ceiling on an unimproved lot.
The combined project, once construction began
| Rolling the land forward into the build | Figure |
|---|---|
| Land value + construction cost | $405,000 |
| Land equity already invested + additional construction-stage cash | $33,750 |
| Total construction mortgage | $371,250 |
| Ratio | On the completed mortgage |
|---|---|
| GDS (payment + $240 tax + $110 heat) ÷ $8,000 income | 37.2% |
| TDS (GDS numerator + $300 other debt) ÷ income | 40.9% |
The solution
A Manitoba mortgage broker priced the land stage on its own terms, before an offer ever went in on the lot.
First, confirmed the land lender's actual loan-to-value ceiling — 75% on this file — rather than letting the family assume a standard purchase down payment would apply to a vacant lot.
Second, sized the $23,750 land down payment into the family's savings plan months before the offer, so the $19,000 gap between the assumption and the reality was funded on purpose.
Third, structured the construction mortgage to roll the land equity forward once the lot closed, folding the $23,750 already invested into the down payment on the $310,000 build rather than treating the two transactions as unrelated.
The outcome
The land closed with the correctly-sized $23,750 down payment, and the construction mortgage completed at $371,250 once the build finished, qualifying payment $2,623/mo, GDS 37.2%, TDS 40.9%.
| Cash due at the land closing | Amount |
|---|---|
| Manitoba land transfer tax on the $95,000 lot | $350 |
| Legal fees and adjustments | varies |
Manitoba's land transfer tax was due at the land closing, well before the construction mortgage was even arranged — a separate cash requirement from the down payment itself, and one more line item in the overall residential construction investment a self-build represents.
What to take from this file
- 01Raw land does not follow a home purchase's down-payment tiers. Vacant-land lending carries its own, typically lower, loan-to-value ceiling set by lender policy.
- 02Price the land stage separately, before an offer goes in. Confirming the lender's actual ceiling avoids discovering the real down payment at the closing table.
- 03Land equity can roll forward into the construction mortgage. What's invested at the land stage doesn't disappear when the build begins.
- 04The land transfer tax is due at the land closing, separately from the down payment. Budget it as its own cash requirement, months before construction financing is arranged.
- 05A raw-land LTV ceiling is lender policy, not a regulated figure. It varies lender to lender — confirm it for the specific file, not from general assumption.
Sources
Every regulatory figure in this file traces to one of these primary sources. Client details and anything that varies by lender are illustrative, as flagged below.
- ▸OSFI — Minimum qualifying rate for uninsured mortgages — the minimum qualifying rate — greater of contract rate + 2% or 5.25%.
- ▸CMHC — CMHC Reviews Underwriting Criteria — GDS 39% / TDS 44% maximums and the 600 credit-score floor for insured files.
- ▸CMHC — CMHC Home Start — minimum down payment tiers (5%/10%) and the $1.5M insured price cap.
- ▸Government of Manitoba — Land Transfer Tax — Manitoba's land transfer tax brackets (no first-time-buyer rebate).
- ▸Provincial/territorial mortgage-broker legislation fetched directly (bclaws.gov.bc.ca, legisquebec.gouv.qc.ca, fcaa.gov.sk.ca, web2.gov.mb.ca, nslegislature.ca, assembly.nl.ca) plus FCNB's own site for NB and CanLII's index for PE — see notes for per-province method — provincial mortgage regulators and licence titles.
Illustrative in this file — lender-specific, not rules:
- ▸75% raw-land loan-to-value ceiling — vacant/raw-land lending limits are set by each lender, not by a published regulatory tier.
- ▸5.10% contract rate — rates move daily; not a quote.
Authority & provenance
How this case file was built
We publish the origin, the verification method and the reviewer for every case file, so you can judge how far to trust it before you rely on it with a client.
Where it comes from
Derived from files handled by Treadstone’s fulfillment desk and from scenarios contributed by partner brokerages. Names, employers, exact amounts and dates are changed so no client or file is identifiable.
Provenance: Composite — a pattern seen repeatedly on fulfilled files, not a single transaction.
What is verified
Every regulatory figure traces to a primary source listed above and was checked against it on the date shown. The arithmetic is recomputed by machine on every rebuild.
Anything that varies by lender is labelled illustrative rather than stated as a rule.
Who reviewed it
Reviewed for Canadian regulatory accuracy before publication, and re-checked whenever a cited rule changes.
Reviewed by: Nicholas Parson, Treadstone Associates — reviews every case file before publication.
This case file is professional reference material for licensed mortgage professionals. It is not advice to a borrower, and it is not a lender commitment. Insurer rules, qualifying rates and provincial taxes change — confirm the current position with the insurer, regulator or lender before you rely on any figure here in a live file.