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How do banks assess hobby farm loans?

Posted: Wed Jan 30, 2019 3:16 pm
by Roscoe
Hi, one of our neighbours is putting their 10-hectare farmland with a house on the market. I’m planning to scoop up the property and take up residence. Is there a loan that can meet my needs?

Re: How do banks assess hobby farm loans?

Posted: Wed Jan 30, 2019 4:14 pm
by Otto Dargan
Hello Roscoe. Welcome to the forums.

A hobby farm loan might be the right solution for you. A hobby farm is a rural property that is mainly used for recreational purposes.

Where you can come unstuck with your loan application is if the bank believes that it is reasonable to use the land for commercial farming.

If you can get approved with residential lending, you can generally:

  • Borrow up to 100% of the property value with a guarantor, for properties up to 50 ha or hectares.
  • Borrow up to 95% for home (land size up to 10 ha) or investment (up to 2 ha)
  • Borrow up to 90% for land size between 10-50 ha.
  • Borrow up to 80% for land size between 50-60 ha.

To get approved:
  • Some lenders assess the zoning of your property
  • Lenders also prefer good vehicle access and connection utilities such as electricity.
  • Post-code restrictions may apply.

We are specialist in hobby farm loans. Speak with one of our specialist mortgage brokers to find the right solution for your needs.

Call us on 1300 889 743 or fill in our online assessment form.

Cheers,

Re: How do banks assess hobby farm loans?

Posted: Wed Jan 30, 2019 5:02 pm
by Roscoe
Isn’t there a way I can get a standard loan instead of a hobby farm loan?

Re: How do banks assess hobby farm loans?

Posted: Wed Jan 30, 2019 5:42 pm
by Otto Dargan
Hi Roscoe,

Farms are classified as either hobby or commercial farms based on the valuer’s assessment.

However, there are ways to get assessed like a standard home loan applicant depending on the strength of your case and the lender.

If your assets, income and employment position is strong and stable enough to service the mortgage without income from the farm, we may be able to get you approved with some lenders.

Please note that you can access cheaper interest rates with hobby farm loans than with commercial loans.

Cheers,

Re: How do banks assess hobby farm loans?

Posted: Wed Jan 30, 2019 6:10 pm
by Roscoe
That sounds great. Final question. How do the banks assess a property as being a hobby farm?

Re: How do banks assess hobby farm loans?

Posted: Wed Jan 30, 2019 6:48 pm
by Otto Dargan
Hi Roscoe,

Hobby farms:

  • Are primary residential property.
  • Are not used for commercial income purposes or speculative investment purposes.
  • May be used for growing crops and to raise livestock. However, this must be for the purposes of recreation or lifestyle.
  • Are valued based only on the land and any buildings on it. No machinery, livestock, crops or other rural income producing assets will be included as with commercial farms.

We are specialist rural farm loan mortgage brokers.

Speak to us directly by calling on 1300 889 743 or fill in our free assessment form.