Rural Property Loans

Rural property loans can be difficult to obtain and require specific criteria to be met. Banks are typically strict when it comes to land sizes of more than 10-15 hectares and properties located far away from major cities and towns. Private lenders are often more flexible and understanding when it comes to rural property loans, and they can help to turn your dream into reality. Before applying for a loan, it’s important to understand the differences between a private lender and a traditional bank loan, so that you can select the option that best suits your needs. Community banks and credit unions may be more likely than large national banks to offer land loans. It’s also important to be aware of predatory lending.

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If you want to buy a rural property in Australia, it’s best to start by getting access to a rural loan.

How do Rural Property Loans work in Australia?

If you want to buy a rural property in Australia, it’s best to start by getting access to a rural loan. These loans are considered rural finance which can come from banks, credit unions, specialist lenders and other financial institutions. Some lenders view rural properties as carrying a greater risk and may adjust their lending policies to reflect this. The size of the property, location, zoning, access to public services, and how you intend to use the property can all be taken into account by lenders.

Property Eligibility Requirements for Rural Property Loans and Financing

Private lenders may provide mortgage loans to individuals who are looking to purchase land up to 50ha. To obtain a loan, applicants must demonstrate that they are not taking the loan to run large-scale commercial farming on the land. Private lenders can provide rural property loans with swift approval and credit transfer, and they consider each case on an individual basis. Banks can be more conservative when it comes to land over 200ha, however, private lenders can provide more favourable deals in such cases. In addition, individuals may also be able to obtain a loan for a council-approved liveable shed as a Class 1a structure.

Understanding Land Size

The bank uses your property as a “security” for your mortgage. They’re mainly concerned about “saleability”. The private lenders have the same standard but less strict requirements. Suppose they find a potential objection on your rural property. They may still approve the rural property loan and finance by understanding that the repayments will begin once the situation is under control.

The private lenders readily accept the standard residential property on a traditional block within 100km of a metro location. There’s simply a more prominent market available. Whereas, for some rural areas, it may take weeks, not months, to get loans for rural property.

Unlike private lenders, the banks aren’t into speculative investing in rural property finance. The bank makes money through various home loans and other products. Sometimes, they won’t see any potential gain and turning down the borrower for private lenders loan for a rural property is not the opportunity to make money.

Regardless, we consider and prioritise the understanding of fund, time frame significance and business growth associated with that. We got approval and disbursed the loan quickly after completing a few prerequisites.

The banks are always in a rush, and the property is at face value as if they were going to sell it today and not ten years from now. It is entirely different from what the private lenders offer, hobby farm loans and rural property finance.

The following details will provide further clarity on rural property loans:

  • Up to 10 ha of land can be borrowed up to 95%.
  • You can borrow up to 90% of the property’s value for land more significant than 50ha if you live near a major city. Otherwise, you can borrow 80%.
  • Maximum 60 ha of land: Borrow up to 80% of the property’s value

Full 100ha land size: Depending on your case, you can borrow up to 70-80% of the property’s value.

More extensive than 100ha: Lenders will often view this type of sizable land as “income-producing”, even though it is not your intention. However, if you intend to live a lifestyle, it’s best to talk to us.

Commercial farms: Loans are typically limited to 60% of the property’s value for the land you intend to use as a commercial farm.

Guarantor loans: Only selected lenders will allow you to borrow up to 100%

Rural properties up to 100 hectares can get discounts and a competitive professional package.

There are some other considerations too when financing rural property loans and finance, like:

Localisation

It can be hard to finance remote locations, especially for banks that tend to take a conservative approach when investing in properties with limited market appeal. However, private lenders deal differently.

Additionally, use the postcode calculator for information about any lending restrictions in the area you are interested in purchasing. Some lenders do not have any limits on postcodes at all.

Excellent access by roads

Banks are attracted to properties that have easy access and are accessible from all-weather roads. However, they consider leading roads in good condition; dirt, rough roads cannot be acceptable; private lenders will not agree to it while offering rural property loans to the borrower.

Services related

Partially-serviced rural properties might be acceptable for electricity, water, and sewerage connections. However, it decreases the cost of restoring the property to marketable condition.

Rural properties with solar power may be accepted, even if they won’t link to the grid.

Zoning and Rural Property Loans

While some lenders consider the zoning of your property, others do not. Below are the most popular types of zoning.

NSW property zoning- Rural

General Residential (R1) Small properties usually less than 2 ha t located near regional centres. Acceptable in most cases.

Rural Landscape (RU2) NSW: This flexible zoning allows for many different uses, including residential housing, tourism, and agriculture. How much we can lend will depend on the land size and usage.

Large Lot Residential NSW (R5): Typically, this is residential housing in rural areas. Our lenders usually accept this.

Rural Residential Zone NSW: In this zone with ‘Large Lot Residential, many properties remain in the old area. You can also break this down into ‘rural fringes’ and ‘rural life—moreover, usually acceptable for lending purposes.

Rural Small Holdings NSW: This usually refers to rural properties or lifestyle properties located in rural areas. Our lenders are generally happy to accept properties situated in this area.

Primary production NSW: Typically used for intensive farming rather than extensive agriculture. The size of the land and its use will affect how much we can lend.

VIC Property Zoning- Rural

Rural Living Zone VIC (RLZ): Primarily a zone used for residential purposes with minor agricultural activities.

Rural Conservation Zone VIC (RCZ): Rural areas with ecological importance. One house is possible and usually acceptable for Rural Property Loan lending purposes.

Rural Activity Zone VIC (RAZ): This flexible zone allows for residential, commercial, and tourist use. How much money we can lend will depend on the purpose of the property.

Farming Zone VIC: These are sometimes rural properties, but other times they can be commercial farms. How much we can lend will depend on the land’s size and usage.

Property zoning in QLD and WA – Rural

The zoning laws in Queensland and Western Australia vary from one council to the next. It is best to get in touch with your local council and determine which land and what restrictions.

You can contact us with any questions regarding rural property financing in these areas.

The remaining States in Australia

All rural properties within the ACT can be accepted by at least one of our lenders. Contact us for rural properties in SA and NT for information about rural property loans.

However, every lender’s assessment of rural property lending is different. Let’s put it the other way, depending on the size of the property and its use; few lenders might approve or refuse to grant particular zoning.

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Advantages of Rural Loans

The key benefits of rural property loans include the elimination of down payment requirements, relaxed borrower qualifications, savings on private mortgage insurance (PMI), a wide range of eligible properties, and lower closing expenses.

Disadvantages of Rural Loans

The primary disadvantage of rural property loans is the increased conservatism of banks in approving them, stemming from the fluctuations in property values and the risk of economic decline in rural areas. Additionally, rural property loans may come with added mortgage insurance, have income restrictions, and only be applicable to single-family properties.

Case Study: Rural Property Loan for a Small Farm

One of our clients has decided to purchase a small farm in a rural area, to start a family and have a self-sufficient lifestyle. Our client has been saving money for a deposit but he doesn’t have enough to afford the 20% deposit that most conventional loans require. He has heard about rural property loans and decided to investigate further.

After some research, he found us. We connected him with a private lender who offered him a rural loan at easy terms. He agreed to the terms. We took care of the documentation. The money was in the client’s account within 72 hours. He moved into his new farm and started working on his new self-sufficient lifestyle. He was happy that he was able to purchase his dream property with the help of a rural property loan.

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