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Hobby Farm Loans

More and more Australians are opting for a ‘green change’ and are heading into the countryside to live on the land. Although living on a small farm or lifestyle block can be an exciting change, they can be difficult to finance.

The majority of lenders do not lend for properties that are over 10 hectares (25 acres). Are hobby farm loans available for large lifestyle blocks?

How much can you borrow?

  • Land size up to 10 ha: You can borrow up to 95% of the property value.
  • Land size up to 50 ha: You can borrow up to 95% of the property value.
  • Land size up to 60 ha: You can borrow up to 80% of the property value.
  • Land size up to 100 ha: You can borrow up to 70% – 80% of the property value on a case by case basis.
  • Land size over 100 ha: These farms may not be considered as “hobby farms” by the banks. Please discuss your situation with us if you believe your property is not “income-producing” (see below definition).
  • Commercial farms: Larger agricultural businesses can be financed, often loans are limited to a maximum of 60% of the property value. Please discuss your situation with our mortgage brokers.
  • Discounts: Competitive professional package and basic loan discounts are available for blocks that are up to 100 ha in size.

The main problem banks have with financing a hobby farm is to do with the improvements that typically need to be undertaken and what the farm is used for. Please read below for more information.

You can also get a liveable shed loan although it will need to be council-approved as a Class 1a (inhabitable dwelling) structure. Note that vineyard loans are also available.

Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will let you know which lenders will accept your hobby farm.

What is a hobby farm?

Generally speaking, a hobby farm is a rural property used for the purposes of small-scale farming.

Strictly speaking, the farm is designed for personal fulfillment or self-sustainability rather than for the purposes of turning a profit from a commercial basis. In saying that, small-scale working farms have been known to provide diligent owners with a second source of income.

Some of these small-scale agricultural operations are the same for a commercial farm and can include such activities as growing fruit and vegetables or raising farm animals like cows, chickens, sheeps and pigs.

Want to know more about hobby farms?

Check out the ‘What Is A Hobby Farm?’ page.

Does the zoning matter?

Some lenders take the zoning of your property into account and others don’t. The most common types of are listed below.

NSW rural property zoning

  • General Residential (R1): Small properties often under 2 hectares that are next to regional centres. Normally acceptable.
  • Rural Landscape (RU2) NSW: A flexible zoning that allows many agricultural, tourism and residential housing uses. The land size and usage will determine how much we can lend.
  • Large Lot Residential NSW (R5): Typically residential housing in a rural location. Normally acceptable to our lenders.
  • Rural Residential Zone NSW: This zone has been replaced by ‘Large Lot Residential’ but many properties are still in the old zone. This can also be broken down to ‘rural fringe’ and ‘rural living’. This is normally acceptable for lending purposes.
  • Rural Small Holdings NSW: This typically refers to hobby farms and lifestyle properties in rural areas. Normally, properties in this zone are acceptable to our lenders.
  • Primary Production NSW: Typically used for extensive agriculture rather than intensive agriculture. The land size and usage will determine how much we can lend whether you may need a farm loan instead.

VIC rural property zoning

  • Rural Living Zone (RLZ) VIC: Usually used for residential purposes with minor agricultural activities.
  • Rural Conservation Zone (RCZ) VIC: Rural areas of environmental importance. A single house can be built, typically acceptable for lending purposes.
  • Rural Activity Zone (RAZ) VIC: A flexible zoning that allows agricultural, residential, tourism and business use. The usage of the property will determine how much we can lend.
  • Farming Zone VIC: Sometimes these are hobby farms and other times commercial farms. The land size and usage will determine how much we can lend.

QLD and WA rural property zoning

Unlike New South Wales and Victoria, zoning in Queensland and Western Australia differs from council to council.

In this case, it’s better to contact your specific council and ask them what the land can be used for and what the limitations are.

You can then contact us so we can let you know if we can help you.

All other states

All hobby farms in the ACT are acceptable with at least one of our lenders. For rural properties in SA, NT and TAS please contact us for information regarding what finance is available.

Each lender assesses rural properties in a different way. Some will not approve particular zonings while others only consider the land size and usage.

Is the property in a commercial farm type zoning?

Call us and we can see if we can get you approved for a commercial loan.

Is the property in a hobby farm type zoning?

Then it will likely be accepted depending on the land size and usage!

Please call us on 1300 899 743 or fill in our free assessment form and one of our mortgage brokers will contact you to discuss your options.

Are there location restrictions?

Like buying any other type of property, some lenders have location or postcode restrictions.

Luckily, we know two lenders who are less conservative when it comes to location so complete our free assessment form and one of our hobby farm specialists can tell if you qualify for a hobby farm loan.

When does a hobby farm become a commercial farm

The main question that the banks will ask us is if the farm is a commercial farm or a hobby farm. For example one of our banks has the following policy:

“The use of the property is solely for the purpose of private residential occupation, including private residential occupation by a tenant, (i.e. must not be used for commercial income producing purposes or as a short term speculative investment or development).

Another lender takes the position that once market gardens and other farming properties are able to produce or have the potential to produce sufficient income to meet operating expenses and sustain the farm enterprise they are generally no longer considered as hobby farms.

In some cases, the land may be used for the growing of crops and/or the holding of limited stock, however this is only for the purposes of the private use and enjoyment of the owners. Income may be earned through the renting of the property to a tenant. (i.e. rental property investment).

Note: Any valuation obtained must be based on the land and residence value only. The valuation must not include income producing potential of the land, sheds, machinery, orchards, livestock, etc, which are used for income producing purposes.”

As you can see the banks are more interested in approving home loans for smaller lifestyle properties rather than financing a commercial farm. If you plan to make a business out of running a farm, you can apply for a commercial loan instead.

Can I get a standard loan?

Farms are either classed as commercial or hobby based on the valuer’s assessment but there may be ways to get assessed like a standard home loan applicant depending on the strength of your case and the lender.

If the equipment, land or overall means to run the farm are present but you have a 20% deposit (you’re only borrowing 80% of the purchase price), a lender may still approve your home loan application without having to go to their commercial or business credit team if you can prove that you can “service” the debt without needing income from the farm.

What this means is that as long as your income, employment and asset position is strong and stable enough to service the mortgage without income from the farm, we may still be able to get you approved with some lenders.

What do the banks assess?

Hobby farms can be assessed in several ways by our banks, depending on the location and the size of the property.

Land size: There is technically no maximum land size. However, to qualify with most banks the land must be less than 10ha. Some banks can consider up to 50ha and one can consider any size land as long as the property is not being used for business or income-producing purposes.

Banks are likely to be very conservative with properties over 200 hectares.

Location: Each lender has their own postcode restrictions. At least two of our lenders have no postcode restrictions at all, although, remote properties will always be difficult to finance.

Access: The land must have easy access using an all-weather road. Dirt roads are fine as long as they are well maintained.

Services: The land must be within range to be connected to the electricity grid without excessive costs or have solar power. Town water and sewerage services aren’t required as many Australian properties have tank water or septic tanks instead. Fully-serviced and partially-serviced blocks are both acceptable.

Zoning: Land can be zoned rural, rural residential or the equivalent for your state. Be careful with land that is zoned industrial, commercial or for farm use as they are generally not accepted or may be considered as a commercial farm unless it’s clear they can’t be used as a home. A good rule of thumb is that if the land you are buying is subject to GST then it would be considered as a commercial property by the banks.

Land use: The land can only be used for personal or investment purposes, not as a commercial farm. Hobby farms with minor farm improvements and that don’t produce income from farm production are usually accepted.

What improvements are allowed?

There is no hard and fast rule when it comes to which improvements are considered as residential and which are considered as commercial.

Generally, it’s best to send us the link to the property’s listing in a real estate website and we can let you know where you stand.

Here are some examples and how the banks would assess them.

Residential/hobby farm

  • Standard house, liveable shed or vacant land.
  • Small orchard that doesn’t produce income.
  • A few cattle or horses.
  • A small machinery shed.
  • A dam.
  • Several paddocks and some bushland.
  • The likely buyer of this property would use it as a home or holiday house.

Commercial farm

  • May or may not have a house.
  • Large crop plantations.
  • Dairy farms.
  • Commercial orchards with thousands of trees.
  • Several cabins or tourism-style accommodation.
  • A significant herd of cattle.
  • All other agricultural activities.
  • The likely buyer of this property would use it as an income-producing farm.

That’s not to say that both types of property won’t be considered by a lender!

It’s simply easier to finance a hobby farm than a commercial farm and the best part is that you can access much cheaper interest rates than going down the commercial route.

When is a rural property 'income-producing'?

There are no specific rules that determine the line between a hobby farm and commercial farm.

However, there are general rules for identifying a piece of rural as being income-producing:

  • The property generates over $20,000 in gross income from agricultural activities, or
  • You intend to develop the property for significant agricultural activities, or
  • You need some of this income to prove that you can afford the loan.

Why are the banks so conservative?

During times of drought or during economic downturns, farms tends to fall in value and take longer to sell. This is particularly true in country areas and remote locations where land prices fluctuate more often.

Normal houses on the other hand have more potential buyers and so tend to sell much faster.

Because of this higher volatility, banks tend to be more conservative when approving a home loan for hobby farms.

In addition to this, banks consider commercial farms to be businesses, not a lifestyle purchase so they can only be considered for more expensive commercial loans and business loans.

Are they a good investment?

As mortgage brokers, we can’t provide advice on buying a property but what we can say is that the market for hobby farms is looking a lot better than what it was in the first few years after the Global Financial Crisis (GFC).

Specifically, the demand for small farms within 100 kilometres of a capital is actually quite stable although you’re looking at around six to eight weeks to sell if your plan is to invest.

Like any potential investment property though, it’s essential you do your own due diligence because they each have their own strengths and weaknesses.

What should I look out for in a hobby farm?

Check that the land is suitable for what you’re planning to use it for

This can include fertile soil for growing produce and, for the purposes of caring for animals, fields for grazing and clear access to water sources, such as ponds and lakes.

If you’re buying vacant land then check with council to confirm that you are allowed to build a dwelling on the property.

Check with council regarding zoning and infrastructure projects

Zoning changes all of the time and planned or ongoing infrastructure or commercial projects can have a major affect on your ability to run a hobby farm. For example, a new motorway can affect the peace and quiet that you were after in the first place, while, from a practical perspective, a new mining or gas project can have a massive effect on the health of the surrounding environment and your ability to grow produce.
In terms of actually getting approved for a hobby farm loan, did you know that there are lending restrictions on bushfire prone properties, many of which are located in the same rural areas as lifestyle farms?

Check that you’re getting what you pay for

Sometimes the farm will come with everything you need including built-in stables or houses for animals, troughs, feeding dispensers and fences. That’s great but it also means you have to ensure that you’re getting what you pay for, that is, making sure all of the amenities are in good condition and to code.

Legal requirements

Be aware of local council restrictions as well as state and federal laws and licensing requirements regarding the use of land and owning farm stock.

For more resources and tips on lifestyle farms, go to farmstyle.com.au.

Apply for a hobby farm loan

It helps to get advice from a mortgage broker that specialises in hobby farms before deciding to apply for a home loan.

They can help build a case that addresses the bank’s requirements on land size, location and how much income may be generated from the operation.

Please call us on 1300 889 743 or enquire online and one of our mortgage brokers who specialises in hobby farms can help you to apply for a home loan.

Still have questions? Feel free to comment below and we’ll get back to you as soon as possible.

  • Sujan

    I’m thinking about buying a small house/farm on a rural property but the issue is that it’s in a remote area and it doesn’t have access to the power grid. I was thinking about making it 100% solar powered. Is it possible to get a loan? I can demonstrate that I’m willing to commit to installing the solar package. Is it possible to add this cost to the loan?

  • Hi Sujan,

    “Off the grid” properties can be considered by some lenders on an exception basis. Usually if the properties in the vicinity are similarly powered then it may be something that could be accepted. Feel free to contact us if you require a more thorough assessment.

  • Hi David,

    There are a couple of credit issues in your case.
    Being close to retirement – Lenders want to see you will still be able to afford your loan throughout the loan term.
    Land Size and property type – Not all lenders will consider if the property is rural and with a size of 30 acres.
    Construction – Similarly, not many lenders will prefer to lend for a owner builder as it is considered to be more riskier.

    Our brokers are experts in handling complex scenarios. As they have worked in credit department approving and declining loans they know exactly how it should be presented to the lenders. It would be best for you to contact a broker to get your loan approved.

  • Cole

    Hi there, the property I am buying is a 58 ha hobby farm that is zoned for farming but is allowed to be used as a home. I am just starting to investigate the potential and possibility of what can be done. I want to borrow 80% of the property value with a $2.2m purchase price. Can you help?

  • Hi Cole, yes we can assist with this. We’ll need to know more about the property. The ‘farm zoning’ is fine but what’s more important is how the property is used. If it’s a rural lifestyle type property with a standard house then we have some great options. If the property has significant farming income (>$20,000 p.a.) then some lenders may classify this as a working farm and the lending criteria would change.

  • Sam

    Hi there. Iv found 20 acres of land for a good price on town water and would love to know the best banks to talk to with a deposits of 5% to 10%

  • Hi Sam,
    We’d have 3 – 4 banks we could help you with this. There’s a few things to consider such as if the property has electricity available and if access is easy. If it’s got town water than in most cases this is all fine. What’s the postcode?

  • Hi Malec
    Unfortunately it isnt looking good. You should have clear credit and a solid income plus a 5% deposit and 5% for costs as a minimum. Some bad credit is ok but you’d need a 20%+ deposit.

  • Sam

    The power is 163m away. Post code 3351

  • Hi Sam,

    This is Category Other with Genworth and National with QBE. What that means is that most lenders will consider this to be a high risk location due to the low property market turnover.

    For us this will be ok as we have a few lenders that can look past this. The distance to power is fine for finance, just allow some $ for putting in some power poles and check to make sure the local grid has capacity to add a house to it.

    Please call us on 1300 889 743 if you’d like our help

  • Mable

    I want to purchase a 20 acre hobby farm, which I intend to live in as it has a cozy cabin on it and a nice scenic dam. Does the dam make the lender consider it to be a farm or is this just a rural property?

  • Hello Mable,

    It depends on the lender. Your property would likely be assessed as a rural lifestyle type property as 20 acres is quite small for a working farm, which means you can borrow up to 95% of the property value. Best of luck with your green change! Call us on 1300 889 743 if you’d like our help to get approved.

  • J. Parsons

    My wife and I want to buy a property that is zoned rural, although it’s only 40km from Perth. This zoning suits us perfectly and is what we need as we can park our trucks on the property. Our broker has told us that we can’t get a loan because of the zoning so it’s time to look for a new broker :)
    Can you please advise us if this is something you can help with? Thanks.

  • Hey J. Parsons,

    We should have no problems with this. We need to know a little more about the property like its size. If it is under 50 ha, this is no problem, and I’m assuming it isn’t that big if it’s close to Perth. Bigger properties are usually okay but we may have to reduce the percentage of the property value that you’re borrowing. Please give us a call on 1300 889 743 and we’ll let you know your options. Ideally, send us the link to the listing on the real estate website so we can have a look at the property the way that a bank will.

  • Mullah

    Hey, I’m self employed and the property I’m buying is a 4.1 hectare hobby farm located just next to Sussex Inlet, NSW. It has a large shed/ 3 bedroom shack on the property. It’s already connected to power, has tank water and septic sewerage. Can this be financed?

  • Hi Mullah, yes, we should be able to get you up to 95% on your property. We’d need to know about the condition of the shack and if whether or not it is council approved. Aside from that, it should be fine.

  • Jim Burgett

    Hi I’m looking for finance on a property that’s< 100ha how do I go about it

  • Hi Jim
    Give us a call on 1300889743. If you’ve got the address, zoning, approx value and land size we can let you know if we can assist.

    If you have some pics that uou can email to our broker while on the phone that helps to see how it would be classified and the maximum loan size.

    Best of luck

  • Damien Mowlam

    Hello, would you be able to assist with a commercial farm loan through our smsf – which we would then lease off our smsf to run a commercial agriculture farm? We have a large deposit but would need to include some of the income from the farm to meet the lease payments to meet the mortgage payments required by the smsf. We have other assets (business) outside smsf and a small value freehold premise in the SMSF. Hope that makes sense! Thanks, Damien

  • Hi Damien,
    We’d need to look at the full details of the transaction as this is quite complicated and commercial farms require specialist assessment. Please enquire on our website and when you have provided all of your documents request the broker to ‘Refer to Otto’ for full assessment. https://www.homeloanexperts.com.au/free-quote/

    It looks like you have already sought advice and understand that the land itself can be owned by the SMSF however the business must remain outside of the SMSF. Please be careful as the rules for SMSFs are complicated and strictly enforced by the government. For example if there is a farm house on the land that you use as your home then this may be a problem.

  • Sarah Mote

    Hi, We are looking at a 42ac property which has a residence on it and the land is used for growing about 700 avo trees and also has 4 chalets used for holiday rentals both of which produce an income. its on the market for $1,500,000 as a going concern but haven’t yet investigated the actual amount of income it generates
    We are hoping to live there and use whatever income it produces as part of repayments but will also have an employer paid income of approx $120,000 per year. How would this be classed in terms of a loan, hobby farm or commercial? and what kind of deposit would we be looking at?

  • Hi Sarah,

    It’s difficult to say without a full application, financials for the farm and pictures. But I’d say in this case it would be classified a commercial farm and the max you could borrow would be 60% to 70% of the property value. You could borrow more with a guarantor however they would need to own 10% to 20% as it’s a farm not a standard residential property and the lending policy is a bit different. https://www.homeloanexperts.com.au/commercial-property-loan/100-commercial-loan/

    If that doesn’t suit you then consider buying a property with one or two houses on it, max $1m in price, max 50 hectares (123 acres) with no major agriculture. Then we can lend you up to 95% including LMI at a really good interest rate.

  • Sudhir

    Hi, I’m thinking of going for a 90% lend for a 42 hectare land size farm. I’ve heard that we may be able to get a rate discount so can you tell me what it takes to qualify?

  • Hey Sudhir, one of our lenders has a special discounted interest rate offer and you can check out what it is and how you can qualify for it on our 90% LVR home loans page:
    https://www.homeloanexperts.com.au/no-deposit-home-loans/90-percent-home-loan/

  • Collin

    Hi, I am looking at a property that is 55Hectares, I have the 10% deposit to buy, it has 3 bedroom house, is unfenced and has no farming facilities or cash trees on the property. I work in a fifo role so I wouldn’t be looking to the property to pay the mortgage. It’s near mission beach would I be able to buy this property with a 10% deposit or is it only possible to buy with a 20% deposit?

  • Hi Collin
    That’s a beautiful spot, great choice of a place to buy!
    For >50 ha the max you can borrow is 80% of the property value unless you have a guarantor https://www.homeloanexperts.com.au/guarantor-home-loans in which case you could borrow 100% plus costs.

    If you’d like to buy with a smaller deposit then look for a place that is less than 50 ha and we can help you to borrow 95%. It’s also a good idea if we get you a pre-approval as FIFO income is assessed by some banks as being insecure whereas others are fine with it. We do a lot of loans for FIFO engineers / contractors etc that work in mining either in QLD, WA or Papua New Guinea.

    If you’d like our help then please contact us here https://www.homeloanexperts.com.au/free-quote/

  • Collin

    would you consider a bridging loan a viable option in this case?

  • Probably not… A bridging loan has a ‘peak debt’ and an ‘end debt’ which both must meet certain criteria.

    It would depend on how much equity is in your current property. We’d have to know your full details to be sure. Once you’ve given our broker all of your supporting docs such as payslips, loan statements etc then ask them to ‘refer to Otto’ and we’ll look into the more complex options that may allow you to make it work.

    For example a short term personal loan may work if you are planning to sell your other property and pay off the personal loan soon. Or we may be able to get sufficient equity out of your current property to enable you to buy the next one with a loan for less than 80% of the property value.

  • Scorpion 14

    Hi,
    We have a property in Murringo Nsw 2586. The property is 2.8 acres in size. We own the property outright. We have also a investment property value @700k & owing 409k.
    We would like to build a house on the Murringo property. We roughly need 200 to 300 k.
    We have no deposit, so i would like to know would we qualify for a construction loan.
    Thanks Mark

  • Hi Mark
    Yes we have some lenders that should work with assuming your income and credit history are ok. Please call us tomorrow on 1300889743 and ask for a rural property specialist.

  • Andrew

    Hi there.
    Is it possible to use my super as the deposit for a hobby farm? My wife and I have ~$130K in super and I’m looking for a property around 50ha and under $700K, to be used for primary production. I don’t have a deposit saved (hence wanting to get out of expensive Sydney).
    Thanks, Andrew

  • Hi Andrew,
    Yes it is possible to buy in your SMSF however for primary production land you need to have a larger deposit if it’s in your SMSF. Typically a bank will lend 50% or 60% for a property like that in an SMSF. You may consider a guarantor loan instead https://www.homeloanexperts.com.au/guarantor-home-loans/