What do banks look for when assessing an acreage loan application?

Any general questions you might have in regards to loans and finance.
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Otto Dargan
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Re: What do banks look for when assessing an acreage loan application?

Post by Otto Dargan »

Hello Arlo. Welcome to the forums.

After location and postcode restrictions, lenders will consider land size when assessing your rural property loan application
  • Land size up to 10 ha: You can borrow up to 95% of the property value.
  • Up to 50 ha: Up to 90% of the property value if you’re close to a major town, otherwise you will be limited to 80% of the property value.
  • Up to 60 ha: 80% of the property value.
  • Over 100 ha: At this size, banks will often see it as “income-producing” even if that isn’t your purpose. Speak to us about your intent and we can present a case to the bank.
  • Commercial farms:For commercial farms, loans are usually limited to 60% of the property value.
We are experts in acreage loans. Speak with our specialist mortgage brokers by calling 1300 889 743 or by filling in our free online assessment.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: What do banks look for when assessing an acreage loan application?

Post by Otto Dargan »

Hi Arlo,

If the banks determine the acreage is not being purchased for commercial farming purposes, they generally take these factors into account:
  • Land size: Most banks only accept land up to 10-15 hectares (ha) in size.
  • Location: Remote locations are difficult to finance so try our postcode calculator to find out if there are any potential lending restrictions.
  • Services connected: When it comes to electricity (properties with solar panels can be considered), water and sewerage connections, partially-connected acreages may be accepted.
  • Zoning: If the land you’re buying is subject to GST then it would be considered as a commercial property by the banks.
Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

User avatar
Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: What do banks look for when assessing an acreage loan application?

Post by Otto Dargan »

Hi Arlo,
There is a very thin line between a commercial farm and a lifestyle block, simply because they share a lot in common.
The trick to getting approved for an acreage loan at residential interest rates is to present strong evidence to the lender that these farming activities are for personal use and consumption only.

Bank valuers tend to follow these five rules when characterising properties:
  • The property will realistically generate no more than $20,000 in gross income from agricultural activities.
  • You don’t intend on developing the property for significant agricultural or commercial purposes
  • The value of the property carrying on a business is less than $500,000.
  • The business has not yet produced a taxable profit in 3 of the last 5 years including the current year.
  • You’re not relying on any potential farming income to prove that you can afford the acreage loan.
We are experts in acreage loans. Speak to our specialist mortgage brokers on 1300 889 743 or fill in our free online assessment form.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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