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Bridging Loans for Farms

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We provide bridging loan solutions for those looking to purchase or refinance a farm, whether for residential use or commercial operations. Below we will differentiate between residential and commercial farms, and providing comprehensive information on loan to values (LTV), common title restrictions, property types, affordability criteria, experience, and the flexibility offered by specialist lenders.

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Bridging Loans for Farms

Date

  • June 7, 2024

Author

Joseph Lane

Bridging loans for farms are short term financing solutions designed to bridge the gap between the need for immediate funds and the availability of longer term financing, they can be used to complete on purchases quick, or where this is a chain delay. These loans are particularly useful for farm buyers and operators who need to secure a property quickly, complete renovations, manage cash flow during periods of transition or manage chain delays. Loan-to-value (LTV) ratios are a critical aspect of farm bridging loans. The LTV ratio represents the loan amount as a percentage of the property’s value. For farms, LTV ratios can vary based on the property’s use and the lender’s criteria.

Residential bridging loans for farms

Loan to Value (LTV) ratios for regulated bridging loan suitable for residential farm purchases typically range from 60% to 80%. For residential farm purchases, bridging lenders will access your exit, usually this can be re-mortgage or sale of the property. If you plan to re-mortgage to repay the interest on the bridging loan, affordability is typically income-based and will consider the following income types at around 4.5x their income. This way your bridging lenders will be confident you are able to exit the farm bridging loan onto a residential mortgage.

  • Salaries, dividends, rental income, and other sources.
  • Credit scores and history of managing debt.
  • Regular outgoings and existing financial commitments.

 

Commercial bridging loans for farms

Loan to Value (LTV) ratios for commercial farm bridging loans usually range from 50% to 75%. With bridging loans your exit will either be sale or re-mortgage. For re-mortgage exits lenders evaluate the farm’s profitability, the borrower’s business experience, and financial stability to make sure the borrowers can exit onto a rural mortgage. Some of the items farm bridging lenders will underwrite will be:

  • Profit and loss statements, balance sheets, and cash flow projections.
  • Detailed Business Plans outlining the farm’s operations, revenue streams, and growth strategy.
  • The borrower’s background in farm management and relevant industry experience.

TRY OUR FARM BRIDGING LOAN CALCULATOR

QUESTIONS ON FARM BRIDGING LOANS

What is a bridging loan for a farm?

A bridging loan for a farm is a short term financing solution designed to provide immediate funds for purchasing, renovating, or refinancing a farm property.

What is the difference between a residential and commercial farm bridging loan?

Residential farm mortgages are regulated and for residential use, so lenders will be more concerned about the borrowers income and the property. With Commercial farm bridging loans, they focus on the farm’s profitability and the borrower’s business experience to make sure they are able to get a suitable exit.

How much can I borrow with a bridging loan for a farm?

The amount you can borrow depends on the property’s value and the lender’s criteria, with LTV ratios typically ranging from 50% to 85%.

Can I get a bridging loan for a Grade 1 or 2 listed farm property?

Yes, farm bridging loans are available for Grade 1 and 2 listed properties, though special permissions may be required for alterations if you are renovating the property.

What is the loan to value ratio (LTV) for farm bridging loans?

LTV ratios for farm bridging loans typically range from 50% to 75%, depending on the property’s use and the lender’s criteria.

How do lenders assess affordability for commercial farm mortgages?

Lenders evaluate the farm’s financial accounts, the borrower’s business plan, and their experience in farm management when considering rural mortgages for commercial farms. This should be considered for borrowers looking to get a farm bridging loan for commercial use.

Are solar farms eligible for bridging loans?

Yes, solar farms can be financed with bridging loans, provided they meet the lender’s criteria.

How quickly can I get a bridging loan for a farm?

The approval process for bridging loans is usually faster than traditional mortgages, with funds available within a few weeks.

What are the interest rates for bridging loans for farms?

Interest rates for bridging loans vary based on the lender, the loan amount, and the borrower’s financial situation. They are generally higher than traditional mortgage rates due to the short term nature of the loan.

Are there any restrictions on the type of farm I can buy with a bridging loan?

Most types of farms, including residential, commercial, and mixed use farms, are eligible for bridging loans. However, specific lender criteria and restrictions may apply.

Can I get a bridging loan for a farm renovation project?

Yes, bridging loans are commonly used to finance renovation projects, allowing borrowers to improve the property before securing long term financing.

Can I get a bridging loan for a farm if I have a poor credit history?

While a poor credit history can make it more challenging to secure a bridging loan, some specialist lenders are more flexible and may consider other factors in their decision.

Can I get a farm bridging loan with property restrictions?

There are many farm bridging loan options allowing for agricultural properties with title restrictions common restrictions on farms that we provide bridging loan solutions for include:

Agricultural Ties: properties with agricultural ties require that the occupants be employed in agriculture. This can limit the pool of potential buyers and complicate financing.

Easements and rights of way: can affect property value and usability, impacting loan approval.

Lender Preferences: some lenders are reluctant to finance rural properties due to perceived location risks, market volatility, maintenance costs, and limited resale potential. Mortgage Lane is connected with bridging lenders that understand the nuances of rural properties and offer more flexible financing options.

Who can apply for a bridging loan for a farm?

Both residential buyers looking to purchase a farm as a home and commercial operators seeking to buy or improve a working farm can apply for a bridging loan.

What is the typical loan term for a bridging loan for a farm?

Bridging loan terms usually range from a few months to two years, depending on the project’s scope and the lender’s criteria.

What is an agricultural tie, and how does it affect financing?

An agricultural tie requires that the property occupants be employed in agriculture. This restriction can limit buyer options and affect loan approval, this usually requires specialist lending avenues for borrowers looking for a farm bridging loan.

Are there lenders who specialise in rural properties?

Yes, Mortgage Lane works with specialist lenders who understand rural properties and offer flexible farm bridging loan options tailored to their unique needs.

How do lenders assess affordability for residential farm mortgages?

To exit your farm bridging loan, you will either sell or you may need a residential mortgage.

Rural mortgage lenders assess affordability based on personal income, credit history, and regular expenditure, farm bridging lenders will underwrite a borrowers income if they plan to re-mortgage to make sure they are able to exit.

Can bridging loans be used for farm shops and catteries?

Yes, bridging loans can be used to finance a variety of farm-related businesses, including farm shops and catteries.

What documents are required to apply for a bridging loan for a farm?

Applicants typically need to provide financial statements, business plans, property details, and personal identification documents.

Can I use a bridging loan to buy land for farming?

Yes, bridging loans can be used to purchase land for farming, if the land meets the lender’s criteria.

Can I refinance a bridging loan into a long term mortgage?

Yes, many borrowers refinance their bridging loans into long term mortgages once they secure stable financing.

How does my experience in farming affect my loan application?

For commercial farm mortgages, lenders consider the borrower’s experience in farming as a key factor in assessing the viability of the loan.

What is the role of a surveyor in the bridging loan process?

A surveyor assesses the property’s value and condition, providing a report that helps the lender determine the loan amount and terms.

What is the exit strategy for a bridging loan?

An exit strategy is a plan for repaying the bridging loan, typically through selling the property, refinancing with a long-term mortgage, or using business income.

Speak to a Bridging Advisor Today

Opening Times
  • Mon – Fri 9am to 6pm
  • Closed Sat & Sun

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By submitting your details in this form, you agree to our privacy policy and occasional marketing information via email around relevant products and services. You can opt out at any time

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