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Farm and Agricultural Land Mortgage Loans

Key information you need to know about how to find the best farm and agricultural mortgages in the UK

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 11th December 2019 *

Due to the ever-increasing price of land, most people who harbour ambitions of becoming farmers are highly likely to need some form of commercial mortgage borrowing to buy agricultural land.

The unique nature of the farming industry usually renders a traditional mortgage inadequate for the purpose of buying farm buildings and other agricultural property. 

If farmers want to buy a new home they need access to experienced advice in order to find the right mortgage for their needs. This article looks at how farm mortgages work and how you can find the best solution for your own particular circumstances. 

If you’d like to speak with an expert about how you can secure a mortgage to buy a farm or for agricultural land, call us on 0808 189 2301 or make an enquiry and we’ll match you with the best advisor for your circumstances.

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What is an agricultural mortgage and how do they work? 

An agricultural mortgage (sometimes referred to as farm mortgage loans) is specifically designed to provide a farmer or agricultural business with a line of credit so they can purchase: 

  • Farming / agricultural land
  • Farm homes
  • Associated farm buildings
  • Equestrian land and associated buildings
  • Renewable energy sites
  • Country estates

In addition, agricultural mortgages can be used to provide funding for improvements or extensions to existing farm / agricultural properties and the associated land. They can also be used to consolidate existing loans. 

Agricultural mortgages are available on both a repayment and interest-only basis. As part of the terms for agreeing a mortgage loan of this nature, lenders generally look to use any properties and associated land as security.  

An agricultural mortgage tends to fall under the category of commercial mortgages and are generally only available from lenders who can provide the expertise and understanding of how an agricultural business operates. 

What constitutes whether an agricultural mortgage is specifically needed depends on the restrictions on the title of the land or property being purchased. 

Typically, most residential properties have a restrictive covenant on the title stating that the property must not be used to store livestock.

Farms and agricultural properties would not have this and may even have the very opposite, which would be what’s known as a positive covenant stating that the land or property must be exclusively used for the storage of livestock.

If you’re interested in getting an agricultural mortgage and would like to know more about how they work, get in touch and we can arrange for an expert to contact you directly. 

How much I can borrow on an agricultural mortgage? 

Agricultural mortgages can provide a huge degree of flexibility with minimum lending amounts starting from as little as £25,000, and most lenders are able to offer maximum loans that are uncapped should a large borrowing need exist. 

Due to the unique nature of the agricultural industry, each business’ mortgage application will be assessed on its own merits. The amount you can borrow will vary from lender to lender and will depend upon a number of factors, namely: 

  • Value of the properties and land
  • The strength of your business plan and projected income
  • Industry experience
  • Income and expenditure
  • Size of deposit
  • Credit record

For tailored advice about how your personal factors could impact your mortgage application, speak with a commercial mortgage expert. Just make an online enquiry to get started. 

Value of the properties and land

Most lenders will expect an experienced agricultural surveyor to provide an accurate valuation of the properties and land you’re looking to purchase in order to ensure it offers adequate security for any proposed mortgage loan. 

The strength of your business plan and projected income

While the value of the property and land is important, the vital factor which can determine how much you can borrow for an agricultural mortgage is the strength of your business plan and the projected income you expect to generate. 

An agricultural mortgage company will want to see clear evidence that a business is profitable enough to be able to afford the loan repayments. They do this by assessing your trading accounts, specifically the earnings before interest, tax, depreciation and amortisation (EBITDA). 

If you’re an existing business which has been trading for a number of years, most lenders will usually request evidence of the last three years’ trading accounts although some may only ask to see the previous two years. 

Industry experience

Having previous experience within the agricultural industry will add much more credence to your application and will provide most lenders with confidence when reviewing your borrowing request. 

However, if this is your first foray into farming, don’t panic! There are certain lenders who will happily consider your application, based upon strong projected income forecasts (usually over two or three years) for your prospective business. Just be prepared to miss out on the best rates the first time around.

Income and expenditure

In addition to reviewing your trading accounts and income projections, agricultural mortgage providers may also want to conduct further affordability assessments by reviewing your own income and outgoings. 

Most lenders will ask you to include 3 months personal and business bank statements with your application. Some may ask for the previous 6 months. 

Size of deposit 

Agricultural mortgages typically require a deposit of between 20% and 40%, depending on the strength of your application. Some lenders may be prepared to consider a higher loan-to-value (LTV) of 90% or even consider a no deposit mortgage if additional security can be provided. 

Credit record

There’s no doubt a poor credit record could affect how much you can borrow for an agricultural mortgage as the number of lenders prepared to review your application will reduce. 

However, it is certainly still possible to get an agricultural mortgage if you have bad credit on your file, particularly as the farm properties and land can provide additional security which may counteract any discrepancies in your credit history. 

If you’ve previously had issues with your credit record, make an enquiry and we can arrange for an advisor we work with to provide more information and offer assistance. 

Will an agricultural mortgage calculator show me how much I can borrow? 

If you’re looking to purchase a farm or agricultural land, during the initial stages of the buying process a mortgage calculator can be a useful tool to give a rough indication of what you can borrow and how much it may cost. 

It should be stressed that mortgage calculators should be used for indication purposes only and not as an exact guide of how much you will be able to borrow. 

If you’d like a more precise assessment of how much you will be able to borrow, get in touch and we can arrange for an advisor we work with to help you identify the providers who can offer the lending you require. 

How can I secure the best agricultural mortgage interest rates? 

As outlined above, each farm mortgage is reviewed on a case-by-case basis, therefore, the interest rates on offer will be based upon how a lender perceives the relative strength of an application. 

For example, an application with a high deposit, strong evidence of experience and profitability alongside a solid credit record will give greater confidence across a wider range of lenders who will, in turn, be prepared to offer their most competitive rates. 

If you’d like to know more about the current agricultural mortgage rates available in the UK, get in touch and we can match you with an expert who can discuss this with you further. 

How can I find the best agricultural mortgage lenders?

If you’re looking for a farm mortgage, you’ll certainly find plenty of mainstream lenders able to offer this type of borrowing. 

Amongst the major UK high street banks, Barclays, Natwest, Santander and RBS all offer their own agricultural mortgages. In addition there are specialised UK lenders such as the agricultural mortgage company (AMC) who can also provide this form of lending. 

However, approaching all of these lenders directly can be quite an arduous task with no guarantees that you will definitely have found the right solution for your particular needs.

The best way to find a farm mortgage that best fits what you’re looking for is to use a specialist broker. This is where we can help. 

The brokers we work with already have a deep understanding of what each of the lenders in this particular sector has to offer and will be able to help you find the provider and product that best suits your circumstances. 

If you make an enquiry we can match you with an advisor with experience in arranging agricultural mortgages to discuss this in more detail with you. 

Frequently asked questions

Got a question about farm mortgages that we haven’t answered yet? See if we’ve covered your question below and if not, send us a message with your query.

Can I get a residential mortgage on a farm?

While it is possible to get a traditional, residential mortgage to buy a farm, the lenders you could choose from are likely to be limited, which could make it difficult to find the best rate.

For the best rates and repayment terms when you want to buy a farm, specialist agricultural lenders will likely offer better terms than you might find if you went to a regular mortgage lender.

If you need a mortgage to buy a farm, the specialist advisors we work with will know which lenders to turn to for the best deals.

What are the typical repayment terms for a farm mortgage?

The good news for any budding farmers is that repayment terms are pretty flexible for farm mortgages. Loan terms will vary depending upon the lender however, typically, they can be between five and 30 years. 

Lenders can also be quite open regarding the frequency of repayments and can arrange them in line with your business’ cash flow – monthly, quarterly or even on an annual basis.  

What documents do I need to get an agricultural mortgage?

When applying for an agricultural mortgage, lenders will want to see certain documents to support your application and help them decide on the risk of lending to you. 

The documents you should expect to provide may include:

  • Business accounts
  • Bank statements
  • Assets and liabilities statements
  • Planning permission (if applicable)
  • Some lenders may also request a business plan to prove the viability of your agricultural investment
  • Accountants’ projections are often asked for

What happens to my farm mortgage if I pass away? 

Unlike traditional mortgages, where the debt is typically covered by a life insurance policy ensuring the outstanding balance is repaid in the event of your death, it is possible for an agricultural mortgage to pass from generation to generation on a case-by-case basis.

As long as the repayments continue to be paid when agreed, the loan may be able to continue until completion on the original terms.    

What is a mortgage with an agricultural tie in? 

Certain properties in the UK have a legal restriction on them where planning permission has only been granted on the basis that the dwelling is to be owned solely by somebody employed in the local agricultural economy. 

This is what is known as an ‘agricultural tie’ and mortgage lenders dealing with such properties must ensure that they have satisfied the legal requirements that the applicant qualifies under the terms of the covenant. 

Be aware of these kinds of properties as should the lender have to repossess the property, the number of prospective buyers is lower. This could impact the value of the property and the LTV offered.

Finding mortgage lenders for properties with agricultural ties can be difficult. This is where we can help. If you work in agriculture and are looking for a mortgage in such circumstances, make an enquiry and we will arrange for an advisor we work with to help you find an appropriate provider. 

Can I get a farm mortgage on agricultural land in Northern Ireland? 

Yes, it’s possible. You can apply agricultural mortgage loan for a farm or against agricultural land in any of the home countries: England, Scotland, Wales and Northern Ireland. 

Regardless of where you reside, it’s important you find agricultural mortgage providers who understand the local agricultural economy. If you get in touch we can arrange for a local expert to contact you. 

Can you use a reverse mortgage for an agricultural property? 

Most experts will tell you that a reverse mortgage loan would probably not be the best lending option for purchasing a farm or associated land as they are typically used for releasing equity in your property once you’ve reached retirement. 

As outlined above, an agricultural mortgage would likely be a more suitable solution for such circumstances. 

Speak to an agricultural mortgage expert

Buying a farm can be quite a complex purchase which requires specialist advice to guide you through the process. If you’d like to know more about how to get a mortgage loan on a farm or associated agricultural land then get in touch with us. 

The advisors we work with can offer the expert agricultural knowledge and advice you need, tailored to your own circumstances.  Call us on 0808 189 2301 or make an enquiry to get started.

Updated: 11th December 2019
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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