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How much will I be able to borrow with an acreage loan?

Posted: Wed Mar 27, 2019 5:14 pm
by Aditi
Hi, I’m looking to purchase an 11.83-hectare site in the rapidly expanding outskirts of south-western Sydney. This will be more of a lifestyle block than anything else. The listed price is $400,000, so I’m trying to figure out how much I’ll be able to borrow or if I’ll have to look for a more modest acreage. What do banks look for in a residential acreage/lifestyle block?

Re: How much will I be able to borrow with an acreage loan?

Posted: Wed Mar 27, 2019 7:02 pm
by Otto Dargan
Hello Aditi. Welcome to the forums.

Lenders will assess the location of the property being offered as security when assessing a hobby farm loan applying stricter lending policies and higher interest rates for high-risk locations.

This generally means that they will often limit the maximum available Loan to Value Ratio (LVR) and the loan amount you can borrow.

You can use our postcode calculator to find out if the property is considered as high risk by the bank.

After location, lenders will consider the size of the land.

The thing is not all lenders will approve an acreage loan if the block of land is more than 10 hectares. Those that do will generally limit your LVR to 90% of the property value for land sizes between 10 and 50 hectares (ha).

Our mortgage brokers specialise in acreage loans.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a lifestyle block loan.

Cheers,

Re: How much will I be able to borrow with an acreage loan?

Posted: Wed Mar 27, 2019 7:52 pm
by Aditi
We’ll have some livestock and plan to grow vegetables solely for our own consumption. How do I make sure that my property is considered a lifestyle block instead of a commercial property?

Re: How much will I be able to borrow with an acreage loan?

Posted: Thu Mar 28, 2019 11:32 am
by Otto Dargan
Hi Aditi,

There is a very thin line between a commercial farm and a lifestyle block, simply because they share a lot in common.
To get approved for an acreage loan at residential rates instead of commercial rates, you’ll have to show evidence to lenders that the primary goal of these farming activities is for personal use and consumption only.

Bank valuers generally tend to follow these five rules:
  • The property will realistically not generate more than $20,000 in gross income from agricultural activities.
  • You don’t intend to develop the property for significant agricultural activities.
  • The value of the property carrying on a business is less than $500,000.
  • The business has not produced a taxable profit in 3 of the last 5 years.
  • You’re not relying on the income generated through farming to prove you can afford the loan.

Cheers,

Re: How much will I be able to borrow with an acreage loan?

Posted: Thu Mar 28, 2019 12:18 pm
by Aditi
I’ve been going through your website and it looks like I’ll need to pay the LMI. How much LMI will I be in the hole for?

Re: How much will I be able to borrow with an acreage loan?

Posted: Thu Mar 28, 2019 1:50 pm
by Otto Dargan
Hi Aditi,

Lenders Mortgage Insurance (LMI) is generally applicable when you’re borrowing more than 80% of the purchase price. There can be huge differences in your LMI premium depending on your Loan to Value Ratio (LVR) and the lender you choose.
Use our LMI calculator to find the cheapest LMI from our panel of lenders.

We specialise in acreage loans and have helped many Australians buy their own rural property.
Give us a call on 1300 889 743 or fill in our free assessment form to get the cheapest LMI premium from our panel of lenders.

Cheers,