Borrow on a $250,000 lot with 35% down, a 7.5% rate and a 15 year amortization and you pay $1,495.83 a month. And yet $126,653 is still owed when the 5 year term ends. The calculator shows the payment, that leftover balloon balance and the cash you need on day one.
What is a balloon, and why does the term matter more than the payment?
Land loans are usually short. The payment is worked out over the amortization, 15 years here, but the lender wants whatever is left back when the term stops. That last amount is the balloon. You pay it from savings, from a sale, or by refinancing into another loan or a construction mortgage.
Terms run from 1 to 10 years and amortizations from 5 to 25. Shorter repayment? You’ll pay more each month and owe a smaller balloon. A longer one keeps the payment low but pushes more debt into the final year. Try a few pairs and set the balance due against the money you expect to have, since that comparison is the whole point. The table shows how slowly the default balance falls.
| End of year | Balance owed |
|---|---|
| 1 | $156,346 |
| 2 | $149,721 |
| 3 | $142,591 |
| 4 | $134,915 |
| 5 | $126,653 |
How much does a bigger down payment help?
On the default loan, 35% down is $87,500, so you borrow $162,500. Closing costs of 2% add $5,000, which puts the cash needed at purchase at $92,500. Across five years the payments include $53,903 of interest, and the balloon is $126,653.
Now move the down payment to 50% and the loan drops to $125,000. The payment falls to $1,150.64, interest over the term to $41,464 and the balloon to $97,426. But the cash needed climbs to $130,000.
So which do you find more easily, monthly cash or a lump sum? Let the answer pick the split.
What can go wrong with a land loan?
The first mistake, and it’s a common one, is planning around the monthly payment alone and never asking what happens in year five. If you can’t pay or refinance the balloon, the lender can act on the loan. The second is that people forget what it costs to make the land usable. Zoning changes, servicing, surveys and environmental checks aren’t in the result, and any of them can be big.
Lenders often ask for 25% to 50% down on raw land. Rates run above those on a house mortgage, so type in the offer you actually get, not the defaults. If a home already stands on the lot, it’s a mortgage and you should use the mortgage calculator instead.
Where do the numbers come from?
The payment follows the Canadian mortgage method, with the rate compounded twice a year and equal monthly payments, and the balances come from that schedule. The defaults are sample values, not quotes, so don’t read them as an offer. We have no connection with any lender, the CRA or any government body, and the figures are estimates.
Buying land also triggers a transfer tax in most provinces, which the land transfer tax calculator works out. Legal and survey fees fit in the closing costs calculator, and the down payment calculator is the place to plan the cash for the build.
Frequently asked questions
How big a down payment does a land loan take?
Lenders often ask for 25% to 50% on raw land. The default is 35%, and the calculator shows the cash at each level.
What's owed at the end of the term?
Whatever the payments haven't repaid. On the default loan that's $126,653 after 5 years.
Why is the rate higher than on a home?
Land loans often carry higher rates than home mortgages. Enter the rate from your own quote.
Are building costs included?
No. Zoning, servicing, surveys and environmental costs are left out, so budget for them separately.
Can the term run longer than the amortization?
No. The calculator caps the term at the amortization period, since the loan would be repaid by then.
Sources and updates
Updated: . How we check rates · Editorial team · Updates
Estimate only. These figures are a planning estimate, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns, and we don't offer tax, legal or accounting services. We have no connection with the Canada Revenue Agency, Revenu Québec or any provincial government. Your real amounts depend on details this tool cannot see, so confirm them with an official source or a qualified professional before you act.