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Can you get a mortgage on UK agricultural or farm property?
Agricultural mortgages are a specialist area that you need to be careful with when applying for one.
Getting an agricultural mortgage can take longer than other types of mortgages because an agricultural property has more extensive survey requirements and lenders may require an agricultural business plan or evidence of background knowledge before they grant approval.
Agriculture in the UK operates on 69% of its total land area, employs 1.5% of its workforce (476,000 people) and contributes 0.6% of its GDP. There are over 212,000 farm holdings across the country with varying sizes based on what they specialise in cultivating at any given time.
If you're looking to get a mortgage to buy a farm or agricultural property, you'll find that agricultural mortgage rates are usually higher than other types of mortgages. This is because you'll typically require a commercial mortgage, and there are increased risks with agricultural property, including difficulty in valuation.
What is an agricultural mortgage?
An agricultural mortgage is a loan given to someone who wants to purchase an agricultural property.
These loans are typically used for things like purchasing farmland, buildings or other agricultural commodities that are needed in order to make the business viable. Agricultural mortgages come with different requirements than regular residential mortgages and may have more strict qualifying standards as well.
Why can it be difficult to get an agricultural or farm mortgage?
If you're looking to buy agricultural property in the UK, you'll find that it's more difficult than it would be for other types of properties to find a mortgage provider willing to lend money. This is because an agricultural property is considered a higher risk than other types of property.
Buying agricultural land or agricultural property in the UK is different from buying a residential home. When you buy an agricultural property, it may come with agricultural buildings and equipment on it - but not always. This makes valuing such properties more difficult than other types of properties.
If you find a lender willing to provide an agricultural mortgage for you, they'll take into account your personal circumstances when deciding how much money will be loaned to you. They will be concerned with your background and experience in owning and operating an agricultural property.
What's the difference between farm mortgages and other types of mortgage loans?
Agricultural mortgages are different from other types of mortgage loans because they're a specialised, commercial mortgage product for those who want to purchase agricultural properties, such as farmland and agricultural buildings.
The interest rate charged might differ from other types of mortgages too as agriculture-related products and income sources have different rates associated with them; this could make borrowing costs expensive if not thought about properly beforehand.
An agricultural mortgage is different from a residential mortgage because it's typically more expensive, and the lender may require that someone who can manage agricultural operations lives on-site at the property before granting approval.
How do agricultural mortgages work?
An agricultural mortgage is a type of loan that can be used when you're looking to buy agricultural property. There are many different types of agricultural mortgages out there and they typically come with higher interest rates than other residential or commercial interests.
The typical agricultural home buyer will need to get approved by the lender before going ahead with their purchase; this includes proving that they have an income stream in place for managing the business, as well as being able to prove themselves financially stable enough for not only buying but maintaining such a large investment over time.
What to consider when buying agricultural land
Accumulating agricultural property is never something to undertake lightly, so be sure you have done all the necessary research and are as prepared for this life-changing decision as possible.
There are many things to consider before committing to purchase any kind of agricultural property:
- What are my plans now and in 20 years' time?
- What are the agricultural risks of this land?
- Will it suit my agricultural needs?
- Will I be able to afford the agricultural mortgage repayments?
Another thing to consider when looking at agricultural land has got nothing to do with your current needs but instead what kind of future use you may have in mind - if this changes then so too can the type of property that could work best for you.
Get all these questions answered before deciding whether you're able to purchase the type of agricultural property you want. Our brokers can answer your queries and help find out if there are any potential issues concerning getting a mortgage for agricultural property.
What deposit will I need for an agricultural mortgage?
A typical deposit for an agricultural mortgage is between 20%-40%, depending on your experience and other aspects of your application. With additional security, such as a charge on an existing property, you may be able to get an agricultural mortgage with a higher loan to value ratio.
How do I find agricultural mortgages?
If you want information on how to find agricultural mortgages in your area, it's important to talk with experienced professionals who specialise within this area.
At Teito, our experienced advisers can help you find agricultural mortgages that are perfect for your needs and will be able to walk you through the process of applying for one. They'll also be there to provide agricultural mortgage advice along the way, helping you avoid any potential pitfalls in this complex area of borrowing.
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Last updated 21 February 2024