Tired of the city life? Buy a lifestyle block!

Around one in five Australians live in inner regional areas and one in ten live in outer regional areas and this figure is expected to grow as more Aussies escape the rat race.

Unfortunately, not all lenders will approve an acreage loan if the block of land is more than 10 hectares or you intend to generate income through farming and commercial activity.

How much will the banks lend to me?

Apart from location, the first thing most lenders will consider is the size of land.

Land size will have a direct impact on the Loan to Value Ratio (LVR) that the lender will approve so in most cases:

  • 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 are close to a major town, otherwise you can borrow 80% of the property value.
  • Up to 60 ha: Borrow up to 80% of the property value.
  • Up to 100 ha: Borrow up to 70% – 80% of the property value on a case by case basis.
  • 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 land that you intend to use for commercial farming, loans are usually limited to 60% of the property value.
  • Discounts: Competitive professional package and basic loan discounts are available for acreages that are up to 100 ha in size.

As with all types of property, banks are mainly concerned about the “marketability” of the property.

Banks want to ensure that the rural acreage can be easily sold in the event that you default on your mortgage so they can recoup their losses.

Please fill in our free assessment form or call us on 1300 889 743 and one of our mortgage brokers will give you a call to discuss your situation.


Why is it better to go for a residential loan?

At its very basic, an acreage property will be considered a residential purchase as long as you’re not intending on generating a sole source of income through raising and selling livestock, selling crops or any other farming activities.

That’s great news for you because you can avoid the higher interest rates that come with commercial loans.

Acreage properties are mainly bought for recreational use and lifestyle which is the reason while they’re sometimes to referred to as “hobby” farms.

However, you may still have an opportunity to generate a bit of return from the property through small-scale farming.

One of our banks defines an acreage property as solely for the purpose of “private residential occupation”.

Another lender goes a little further and says that once the property is able to produce sufficient income to meet operating expenses and sustain the farm, it will no longer be considered a lifestyle block.

It’s important to be aware of this because when bank valuers are sent out to inspect the hobby farm, they will value it based on the land and residence value alone.

They won’t include the income-producing potential of the land, sheds, machinery, orchards and livestock.

That means the final valuation figure may come in a lot less than what the vendor (seller) is asking, especially if they’ve used the land for income-producing purposes in the past.

However, if you have a 20% deposit and you can evidence that you’re not relying on income from the farm, you may be able to qualify for a much cheaper residential home loan instead.


The thin line between commercial farm and lifestyle block

There is no hard and fast rule.

It’s not uncommon for owners of acreage to have a couple of cows, horses, chickens and even a small veggie patch.

The trick to getting approved for an acreage loan at residential rates is showing the lender evidence that these farming activities are for personal use and consumption only.

Banks and valuers tend to follow five rules:

  • The property will realistically generate no 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 including the current year.
  • You’re not relying on any potential farming income to prove that you can afford the acreage loan.

Based on the above, banks characterise properties by what the valuers identify.

Definition of a residential acreage

  • A standard house, liveable shed or vacant land,
  • A small orchard that isn’t income-producing,
  • A few heads of cattle or horses,
  • A small workshop,
  • A dam,
  • Several paddocks and some bushland.

Definition of a commercial acreage

  • May or may not have a house,
  • Large crop plantations,
  • Dairy farms,
  • Commercial orchards with thousands of trees,
  • Several cabins or tourism-style accommodation,
  • Several heads of cattle,
  • Signs of other agricultural activities.

We can help!

We can help you qualify for much sharper residential interest rates on your acreage loan.

It’s all about choosing the lender so tell us about the property you’re looking to buy by filling in our free assessment form today.


What do banks look for in a residential acreage?

If the bank determines that the acreage is not being purchased for commercial farming purposes, they will generally take into account the following:

Land size

For most banks, they will only accept land up to 10-15 hectares (ha) in size.

Other banks may be willing to accept land up to 50ha or some won’t have any land restrictions at all if you can show that you’re not undertaking large-scale farming.

The only exception is for land over 200 hectares where banks can be conservative across the board.

Location

Remote locations can sometimes be difficult to finance because, again, banks take a conservative approach to property that has limited market appeal.

Try the postcode calculator to find out if there are any potential lending restrictions for the location you want to purchase in.

Easy access

Banks prefer properties with easy access and all-weather roads.

They don’t necessarily have to be sealed.

Dirt roads may acceptable as long as they’re in good condition.

Services connected

When it comes to electricity, water and sewerage connections, partially-serviced acreage may be accepted.

It all comes down to the costs involved in having to bring the property back up to a marketable standard.

For example, tank water and septic tanks may be acceptable to some lenders in favour of having town water and sewerage connected.

Similarly, acreage with solar power will sometimes be accepted if the property isn’t connected or is at least within range of the electricity grid.

Zoning

Although the names vary from state to state and even council to council, land is generally divided into rural, rural residential or farming or primary production.

The latter zoning means the property will most likely be assessed as a commercial loan application.

A good rule of thumb is that if the land you’re buying is subject to GST then it would be considered as a commercial property by the banks.


What if I want to buy a farm?

If you’re planning to go the whole hog and live and work off the land, we may be able to help you there as well.

Just don’t go quitting your job yet!

By going down the commercial farm loan path, the interest rates will be higher and you’ll need a slightly bigger deposit

You’ll also need to provide some sort of business plan that shows how you intend to run successfully.

Head on over to the farm loans page to get a better understanding of what the banks are looking for in an application, what to look for in a property and tips for running a farm.

If you need a farm loan, call us on 1300 889 743 or complete our free assessment form.


Are you a sophisticated investor?

If you’re looking for a way to rapidly grow your investment portfolio, land banking acreage property can be one way to do it.

The trick is being across upcoming zoning and planning changes with the local council.

New rules that allow for land subdivision or commercial developments can be highly lucractive.

Obviously, there is a high risk with landing banking so you should seek independent financial advice before making a decision.


How to avoid commercial rates

You may still be hit with a high commercial interest rate even if you have no business intent.

It’s all based on the valuation report.

Valuers will take into account highest and best which means they look at the potential for the property to be used for other purposes other than residential.

This includes development and agriculture.

However, you may still be able to get a residential loan with a much cheaper interest rate and better terms.

Since the valuation would come in lower, you would have to provide a larger deposit so you’d have the weigh up the benefit of paying a larger deposit compared to paying a lower interest rate.

How does it work?

By building the right case, a specialist mortgage broker may be able to convince the bank to advise the valuer (in writing) to disregard highest and best use and just rely on comparable residential sales.


Golden tips on choosing an acreage

What you should look for in an acreage will depend on whether you intend to grow food on the land or using the property for recreational use such as horse-riding.

However, you may want to consider the following:

  • Get a soil test to ensure the land is fertile enough to support crops.
  • Sufficient space and fields for grazing a handful of cattle and horses.
  • Close and easy access to ponds and lakes with uncontaminated water.
  • A working dam or, alternatively, a bore water system.
  • Zoning that allows for any renovations or improvements you’re intending to make. For commercial improvements, you may be restricted by rural residential zoning.
  • Apart from soil contamination, consider the land’s proximity to oil, gas and other mining operations. These can have major environment affects.
  • The natural environment can be a potential hazard so find out whether the property is bushfire prone or in a flood zone.
  • Ensure that all structures including the house, stables, fences, gates, wells and everything else are in working order before committing to the purchase.
  • Ensure that you’re across any licences you need to own and raise certain livestock and whether the property itself meets these legislative requirements.

Don’t pay the emotional price

There are practical ways to inspect an acreage and arrive at a fair offer.

However, the problem with hobby farms is that the market price is often driven by emotion from a wide variety of buyers.

An acreage can appeal to a buyer after a reclusive lifestyle while others want the land for commercial reasons.

This may be for running a small business or for storing vehicles and equipment.

The price someone is willing to pay is highly subjective with these types of properties so it isn’t unusual for auction values to quickly blow out.

Set yourself a budget and definitely avoid buying at auction without a pre-approval first.


Do you want an acreage loan?

We’ve helped many Australians to buy their own rural property with an acreage loan.

Call us on 1300 889 743 or complete our free assessment form and one of our specialist mortgage brokers can let you know if you qualify.

  • Stu Hart

    I’d like to borrow 95% for a 46 ha acreage property but I have a bad credit history. Is there any way that I can 95% or will I have to wait / settle for less?

  • Hi Stu, lenders are more wary when lending 95% home loans and a bad credit history generally reduces your chances of getting approved for one. However, we may be able to find other ways to overcome this issue or resolve it so please call us on 1300 889 743 to speak with one of our bad credit home loan specialists.

  • Mark Johns

    Hi my credit score is 874 have a great deposit BUT not allowed to put a dwelling on the land (100 acres)….. seems to be what is stopping me from getting finance. There are100 acre blocks either side of me that have houses (not that I want to build) Frustrated that I can’t get the loan ?

  • Hi Mark,
    For 100 acres vacant land we can lend 80% of the property value or 105% if you have a guarantor https://www.homeloanexperts.com.au/guarantor-home-loans who will put their property up as additional security.
    If there’s a house on the land then we can lend 95%.

  • Mark Johns

    can I call you now ?

  • Hi Mark,
    We’re closed today but I’m available for a brief chat now. I’ll email you my mobile number.

  • Rob Akester

    Need a lender around 90-91% lvr. Property in 2265 on 50 acres. No income producing etc House,pool and shed aready in place.
    282k per year income

  • Hi Rob
    Indicatively yes we can help. We’d need to see the full details to confirm. Thanks

  • Rob Akester

    Just had email that said you cant??

  • Hi Rob
    I’ll email you and you can email this to me for review. Thanks

  • Baker

    I need 80% finance with an acreage loan to buy a 300 acre land that has a house on it. Will this work or is the land too big to finance normally?

  • Hi Baker,
    Property size is definitely an issue and with large land sizes such as this, lenders generally only accept mortgage applications under commercial lending. What’s more, you may be required to reduce your Loan to Value Ratio (LVR).

  • Cortney

    Hi, my partner and I are looking at buying property in the Goulburn region with land sizes of 250+ acres. This will be our first property and we are only wanting the lifestyle, we have no intention of using the land commercially.
    We dont want to spend more then $450k.
    We are unsure if we will buy an exisiting property or build at a later date, but cannot afford to borrow at 60-70%.
    Is this a possible scenario? Or do we need to downsize our land expectations?

  • Hi Courtney
    You’d need to consider a block with a house on it already for a maximum size of 50 ha if you’d like to borrow 80% – 95%. Larger land sizes take a long time to sell so banks aren’t comfortable lending a high percentage of the purchase price (a high LVR).

  • Cortney

    Great, thanks.
    Does having a guarantor make any difference?

  • Yes this would help however as it would be a rural property loan the guarantor would need to own part of the property as well, say 15%.
    It would be better if the guarantor can borrow on their property and then lend this to you. So you have a loan from the bank and another from your guarantor. That way they don’t have to be an owner.

  • Tyson

    Hi team,
    I’m looking at a 106 ha property no dwellings, only to be used as non commercial lifestyle property.
    With a guarantor, what is the possible LVR?
    Purchase price of $225000
    Combined income of roughly $160k p.a

  • Hi Tyson,
    You can likely borrow 50% or 60% of the purchase price if you buy on your own. With a guarantor you can borrow up to 100% however as this would be a commercial loan (due to the size) the guarantor must own a portion of the property that you are buying. A small portion such as 10% is usually fine. This would be a complex loan with much more work than a standard loan and so our mortgage brokers would charge a brokerage fee in this instance.

  • Mel

    Hi,

    We have been looking around at various options as we would love to stay on land but where we currently live, house prices are upward and over of $1m and acreage land a minimum of $550k for 5 acres (approx) so obviously requiring a large deposit. We have just started looking a little further out (postcode 2581 near ACT) and have found a 25 acre or 10ha block for $300k.
    We are both self employed, my husband works full time in the business and I work part time and next month due to return to my Gov job after mat leave. The position is permanent full time but I’ll be doing part time hours for a while and I’ve been employed for 10 years with the same department.
    Our company has been registered and GST registered since 2014 but really only started trading last year. We are currently doing 2017 tax but obviously have all 2017 and 2 quarters for 2018 BAS.
    So, if we were to seriously consider this property, would we need a low doc loan? What % deposit would we need? When would we be expected to build and do we then have to refinance to build or do you do the land and construction loan at the same time? Does rent as genuine savings apply for land and for our situation?

  • Hi Mel,
    The postcode 2581 is considered to be a higher risk postcode so some lenders will limit the amount you can borrow. It’s likely we can assist though, as there are others that can help.
    A low doc loan would allow you to borrow 80% of the property value. Whereas a regular loan would allow you to borrow 95% of the property value as long as the land is below 11 ha (or 50 ha if there is a house). We’d need to discuss what income evidence you have in more detail to determine which option is best.
    Most lenders have a rule that you must build within 12 months or 24 months however I have never seen them enforce this.
    We can do the land and construction loan at the same time or you can do it later, it just depends on when you hae the deposit.
    For a low doc loan you’d need 20% in genuine savings for some lenders and nothing for others. The postcode restrictions plus low doc combination may mean that genuine savings are required. Rent as genuine savings only applies to normal home loans not to low doc loans.
    As this is a complex situation it’s probably best if you speak to one of our mortgage brokers. I’ll email you and cc a specialist in this area of lending.

  • Spencer

    I want to buy a rural property about 100 square hectares in size in Eden Valley, SA with my partner. We’ll be planning to build a vineyard. How much am I entitled to borrow from the banks?

  • Hi Spencer,
    If you intend to use the land for commercial farming, loans are usually limited to 60-70% of the property value. Also remember that vineyards and wineries are particularly specialised so getting approved for a commercial loan comes down to a number of factors, including the location of the property and what you plan to do with the land. Go to our vineyard loan page https://www.homeloanexperts.com.au/commercial-property-loan/vineyard-loans/ and learn more.

  • Adeeb

    Hi we r looking to buy 25 acre in postcode 2580 as a first home buyer , our yearly income $130000 after tax could y plz advise is it possible for us to buy acreage as a first home buyer and get stump duty free ? How much deposit we need to buy a property value $250000 and is there any condition of bank to approve this loan or do u help to get this loan ? If do u have any contact number in Sydney? Plz let me know, thanks

  • Hi Adeeb,
    This is a category 2 postcode which is medium risk and so I expect if we apply with the right lender a 25 acre property will be ok. As a NSW first home buyer you can get a stamp duty waiver even if you’re buying an existing property whereas in some other states it must be a new property to qualify. There’s a first home owners grant calc https://www.homeloanexperts.com.au/mortgage-calculators/first-home-owners-grant-calculator/ that you can use to check your specific situation.
    I’d say you’d need approx $20,000 as a minimum to complete the purchase.
    Our contact number is 1300889743 but I’ll email you and cc one of our mortgage brokers who specialises in this area of lending.

  • Shannon

    Hi my partner and I are looking to buy an acreage in Tasmania. We are first time buyers and we do not have any other loans/debts. Currently we are looking at 33Ha in 7140 with a converted shed which is allowed to be used as temporary but not permanent accom ($250k price tag). The other options is 63Ha with a 3 bedroom house on it located in 7030 ($360k price tag). Both blocks have power available and are within 10 minutes of small towns. The first is about 1hr 10min from Hobert and the second is only 45mins from Hobart.

    We currently live in Sydney and earn around $280k/year combined. We would be looking to remain in Sydney and pay down the mortgage as hard and fast as possible while we waited for the right job opportunities to come up in Tassie. We would aim to move down within 12 to 24 months. My partner will likely work remotely from Sydney or Melbourne as there are no jobs in what he does in Tas. I work for the Government and should be able to get a job in Hobart.

    We do intend to live on the property long term however we would also look to generate income in the form of holiday cabins and possibly a wedding venue but obviously this would come a bit later as we would need council approval.

    Does it seem likely the banks will limit what we can borrow in relation to one or both of the properties?

    Cheers

  • Hi Shannon
    For the first property you could likely borrow 80% of the value as it would be classified as vacant land. For the second property you can likely borrow 50% – 70% of the property value due to it’s size and location. You can borrow 105% for the first property if you have a guarantor. For the 2nd property the size would mean that a guarantor wouldn’t work as the lenders that accept that size don’t have guarantor loans.
    I’d recommend that you look for a property <50ha and with a complete house on it and then you should be able to borrow up to 90% of the property value anywhere in Tasmania with some of our lenders.

  • Shannon

    Hi, that’s really helpful information. Thanks very very much. When we get nearer to making a purchase we’ll be in touch.

  • Adeeb

    Hi my credit scores is under 600 and my annual income is $120000 could you please let me know can i buy investment property with 5% deposit like does bank give me investment loan with only 5% deposit plz let me know, thanks

  • Yes we can do a 95% investment loan with a low credit score.
    However this cannot be combined with an acreage. You need to buy in a town and the block has to be small for this to work. LMI and purchasing costs need to be covered so you need more like 10% – 12% not 5% even if you are getting a 95% loan.