Farm, Agricultural & Equestrian Mortgages

There are a number of finance options to look at if you’re considering buying a farm and/or associated land, depending on the intended mix of uses. In this comprehensive guide, we look at what type of mortgage you’ll need to purchase land and properties for agricultural and equestrian use.

What type of mortgage do you need to buy a farm or agricultural property?

Mortgages to buy property on farmland and agricultural land are usually referred to as farm mortgages or agricultural mortgages, but in reality, they can be commercial, semi-commercial or even standard residential mortgages, depending on the intended use(s).

As most farms have some form of commercial use, the majority of mortgages tend to be provided by commercial lenders, however, no matter what type of mortgage you require, you’ll need to use a lender that has knowledge of the unique economics of the agricultural industry and accepts the risks associated with this type of lending. 

This type of finance can typically be used for:

• The purchase of fully functional farms, farmhouses and rural business property
• The renovation or development of farm property or land
• The purchase of agricultural land - although you may also be able to use a standard land purchase mortgage for this, depending on the intended use
• Finance to support farming activities - usually through releasing equity from the remortgage of existing farm property

How these mortgages work

Agricultural mortgage applications are very bespoke, so although the main criteria are similar to those expected for any type of mortgage, lenders will consider industry-specific factors when considering your suitability for a loan.

Functionally, they are a standard mortgage, so you simply use a deposit or equity from existing farm premises or similar assets to secure your loan and borrow over a set term. Repayments can be made on an interest-only or capital repayment basis monthly, until the loan is repaid.

Lending criteria

As with any commercial mortgage, you’ll need to provide a detailed business plan for your intended use of the farmland and/or property you plan to purchase. This should include:

Previous farming experience and past trading records (where applicable)

Projected future income

A detailed breakdown of intended use of each property and piece of land

Agircultural mortgage lenders will also need to know:

• Your deposit size: Usually you’ll need at least 30% deposit for an agricultural mortgage for a maximum loan of around 70% LTV, however, it may be possible to secure more with other property.
• Land and property specific criteria: Lenders will look at the plot of land and any property included in the purchase. Size and previous use will be important, as well as whether there are any restrictions on their use.
• Personal and business finances and credit history: The requirements are often flexible on this, but clean credit can help your case.

Available lenders and interest rates

Farm Land mortgages tend to be largely offered by commercial lenders, as the vast majority of farms are mixed-use, meaning you’ll often need a semi-commercial mortgage. Some lenders specialise exclusively in agricultural mortgage products due to the bespoke nature of calculating agricultural finances. However, there are certain high street lenders, such as Barclay’s, offering agricultural mortgages.

Farm mortgage interest rates will vary depending on the type of mortgage you need. While semi-commercial mortgage rates are often lower than fully commercial mortgage rates, they are usually more expensive than residential rates, due to the commercial element.

There are a whole host of factors that will determine the rates available to you. How well you, your business and the land and/or property suits lenders’ criteria. For this reason it’s a good idea to seek out a lender whose criteria most closely matches your needs.

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Why you need a specialist broker

Due to the potential for agricultural ties and complex ownership as well as the fact that many farmers have complex income made of multiple streams, a broker with expert knowledge of the industry is highly recommended when looking at farm mortgages.

A specialist broker like ourselves, here at Teito, can help you secure the best farm mortgage available, it’s important to ensure they have a specialist knowledge of agricultural economics. We work with a range of lenders who specialise in this area of lending, and our brokers understand the needs of the agricultural sector and rural land purchase.

Equestrian mortgages

If you’re seeking finance purely for equestrian property or land, including:

• Residential property with a paddock
• A livery yard
• Racing stables
• Equestrian riding school or similar business

Then you’ll likely need a lender with even more specialist knowledge. Standard land mortgage applications won’t always allow for equestrian use. You may also not need any form of commercial mortgage, for example, if your equestrian land is solely for hobby or non-competitive sporting use a residential mortgage may be appropriate.

We also have working relationships with specialist equestrian lenders, so speak to one of our brokers to find out more.

Refinancing a farm mortgage

When you remortgage a farm or equestrian land, lenders will tend to look at the same factors as when you purchase these assets. If you’re operating as a farming business they will look at your previous success and future plans.

Your equity will also play a major role in whether you can refinance your farm and the rates that you’ll be offered. Those with greater equity will typically have access to the best rates. You may also be able to use the equity to re-invest in the farm, for renovation or expansion purposes.

Things to consider

Here are some things to bear in mind if you are applying for a farm, agricultural or equestrian mortgage:

• Agricultural ties - If you’re buying an existing operational farm, it’s important to understand whether there ties (restrictions) applicable. This is a type of covenant that’s applied by the local council and usually relates to the type of purpose a land can be used for or the type of business that can operate there. 
• Tax implications - How your financing is structured can impact the type and amount of tax your farming business is liable for, so it’s important to seek tax advice from a qualified tax adviser with agricultural knowledge.
• Farming experience - If you’re new to farming, lenders will be more cautious to provide an agricultural mortgage. However, the employment of a professional farm planner and manager can help enhance your credentials

Why choose Teito for your farm mortgage?

At Teito we specialise in commercial, semi-commercial and residential purchases and remortgages, so no matter what type of agricultural mortgage you need, we can help.

We have access to over 100 lenders across the market and can search thousands of deals, including exclusive rates, to find the most suitable farm mortgage for your needs. 

Get in touch now for a free, no obligation consultation from one of our knowledgeable brokers. Our service is rated 5 stars by Google and TrustPilot.