RURAL MORTGAGE BROKER
Mortgages in Rural areas can sometimes require more specialist lending avenues, due to their locations they tend to have additional considerations for lenders compared to properties situated in urban areas. Some rural properties come with agricultural ties which lenders will need to be comfortable with and additionally, some come with commercial use. Aside from title restrictions, rural properties can some times be difficult to value, with less properties per mile, rural areas tend to have less sales comparable, so it is important to use a mortgage broker such as Mortgage Lane that can connect you to specialist mortgage products where you will find a solution to any rural complexity.
PROCESS BREAKDOWN
Information gathering and advice
The first process in your Rural Mortgage application will be gathering or updating information in relation to the property, land, or yourself. Once this has been established your rural finance broker will make a product recommendation based on those circumstances, aware of any criteria that might be restrictive.
Credit approval
Once you are satisfied with the product recommended and you have confirmed to proceed to application, this will usually be submitted the same day to give you a decision, Once the lender has approved the deal, we can instruct the surveyor and quantity surveyor, or asset manager.
Underwriting and valuation
Once the application is submitted, your valuation will be paid and depending on the lender will either be instructed right away or on completion of the underwriting checks. Once the valuation is returned as well as underwriting is complete, if acceptable, the lender would then look to make a formal offer. You can then move to legal stage.
Offer and completion
Once you have had your mortgage offer, you will require adequate legal advice and then once you’re happy, your solicitor can draw this down once the legal requirements are satisfied. Your broker at Mortgage Lane will always be checking in on the application post offer, so we are chasing for you too!
Types of Rural Mortgages
We assist homeowners and business owners with rural mortgages. Below we explain all the types of properties we assist with mortgage lending and some of the complexities that we are able to find solutions for.
For Homebuyers
Homeowners are common rural mortgage applicants, due to many rural purchases being with residential property holdings. Some properties we see in rural areas might consist of:- Smallholdings
- Guest houses
- Bed and Breakfast (B&B)
- Live work units
- Farms
Business Owners
When considering rural mortgages for commercial property purchases, it is essential to understand the unique requirements and conditions that come with such investments. Whether you are looking to establish an equestrian centre, a cattery, a kennel, a vineyard, a glamping site, a campsite, or a working farm, it is key to understand some of the restrictions that we see against these property types. When buying agricultural property for commercial use, especially with a rural mortgage you must make sure that your intended use also lines up with any agricultural property restrictions imposed on the title. Business owners tend to buy rural property for the following ventures:- Equestrian
- Cattery
- Kennel
- Vineyard
- Glamping or Campsites
- Working farms
- Commercial Smallholdings
OCCUPANCY RESTRICTIONS FOR RURAL PROPERTIES
Agricultural ties stipulate that the property must be occupied by individuals engaged in agricultural or forestry work, including their immediate family members. The scope of agricultural work is broad, covering activities like crop farming, livestock rearing, dairy farming, horticulture, and various forestry tasks.
Properties with agricultural ties generally have a lower market value compared to those without such restrictions. This depreciation is due to the limited pool of potential buyers, as only those employed in relevant sectors or their dependents are eligible to occupy the property. Understanding this impact is vital for those seeking rural mortgages.
Non-compliance with the conditions of an agricultural tie can lead to legal actions from the local planning authority, including enforcement notices that may compel occupants to vacate the property. Ensuring adherence to these conditions is essential for buyers securing rural mortgages.
Occupants must provide documentation to local authorities demonstrating their involvement in agriculture or forestry. This verification process ensures the property use aligns with the agricultural tie conditions, which is crucial when considering rural mortgages.
In certain cases, it is possible to have the agricultural tie removed. This involves presenting a case to the local planning authority, demonstrating that the property is no longer needed for agricultural purposes. The process can be intricate and time-consuming, requiring substantial evidence and sometimes an appeals process.
To initiate the removal, the owner must prove that there is no demand for the property from eligible agricultural or forestry workers. This often involves extensive marketing to show that no suitable buyers have come forward. Engaging planning consultants or legal experts can also strengthen the case, especially for buyers with rural mortgages.
Agricultural ties often require the property to be used in connection with agricultural or forestry activities, meaning it cannot be solely a residential home without these connections. Buyers using rural mortgages should be aware of these stipulations.
RURAL MORTGAGES ACROSS THE WHOLE OF THE UK
We broker across the whole of the UK and are able to provide rural mortgage loans in the most remote of locations, whilst also being able to assist in areas that have been blacklisted by some lenders. Some of the areas we cover are:
- England and Wales
- Scotland
- Northern Ireland
How much can I borrow?
When applying for a residential rural mortgage, the amount you can borrow typically ranges between 4.5x and 5.5x your gross annual income. This calculation can include all or some of your bonuses, commission, and other income sources, providing a more comprehensive view of your financial situation.
Lenders primarily base their calculations on your gross annual salary. This forms the foundation of your borrowing capacity, other income types considered are:
- Regular bonuses: can be considered by lenders, often at a percentage of their value.
- Commission: If your job includes commission-based earnings, these can also be factored into the borrowing amount.
- Other Income: Additional income sources, such as rental income, dividends, or secondary employment, can enhance your borrowing potential.
- Additional income: sources: such as rental income, dividends, or secondary employment, can enhance your borrowing potential.
Example CALCULATIONS
Gross Annual Income Only
If your annual salary is £50,000, you could potentially borrow between £225,000 (4.5x) and £275,000 (5.5x).
Including Bonuses and Commission
If your gross annual income is £50,000, with an additional £10,000 from bonuses and commission, your total considered income could be £60,000. You could then potentially borrow between £270,000 (4.5x) and £330,000 (5.5x).
Other affordability factors
Credit Score
A higher credit score can increase your chances of securing a larger mortgage amount.
Debt-to-Income Ratio
Lenders will consider your existing debt levels relative to your income.
Deposit Size
A larger deposit can also influence the maximum amount you can borrow, as it reduces the lender’s risk.
RURAL MORTGAGE QUESTIONS
Most lenders have a minimum loan size of £50,000 for rural mortgages. However, there are instances where the loan amount can be lower. Be mindful of the setup costs associated with rural mortgages, which might include valuation fees and legal fees.
You may need local searches when applying for a rural mortgage to purchase a rural property. Local searches are a crucial part of the conveyancing process and provide essential information about the property and the surrounding area. These searches help identify any potential issues or restrictions that could affect your use or enjoyment of the property. Here are some key reasons why local searches are necessary for a rural mortgage:
Planning and Development
Local searches reveal any planning permissions or building regulations that may affect the property. This includes past applications and any future developments planned nearby that could impact the property.
Environmental Factors
Searches provide information about potential environmental risks, such as flood zones, contaminated land, or nearby landfills. This is particularly important in rural areas where such risks might be more prevalent.
Local Authority Information
These searches check for any road schemes, traffic management proposals, or other local authority decisions that could affect the property.
Legal Restrictions
They identify any legal restrictions or obligations, such as public rights of way, conservation areas, or listed building status, which could limit how you use the property.
Utility Services
Local searches can also provide information about the availability and location of utility services like water, gas, electricity, and drainage, which might be different in rural areas compared to urban locations.
Yes, it is possible to get a rural mortgage even with bad credit. However, you may face more challenges and higher interest rates compared to borrowers with good credit. Understanding the types of bad credit and the credit agencies used by lenders can help you prepare for the application process.
Types of Bad Credit
Lenders consider various factors when assessing bad credit, including:
Late Payments
Missing payment deadlines on existing loans or credit cards.
Defaults
Failing to meet the repayment terms of a loan or credit agreement.
CCJs (County Court Judgments)
Legal judgments for unpaid debts.
Bankruptcy
A legal status for individuals or companies unable to repay outstanding debts.
IVAs (Individual Voluntary Arrangements)
A formal agreement to pay back creditors over time.
Debt Management Plans
Informal arrangements to repay debts over an extended period.
Credit Agencies Used by Lenders
Lenders typically check your credit history with major credit agencies to evaluate your creditworthiness. The primary credit agencies in the UK are:
- Experian
- Equifax
- TransUnion
Each agency holds different information, so it’s important to review your credit reports from all three to get a complete picture of your credit history.
Recommended Credit File Service
To better understand your credit standing and prepare for applying for a rural mortgage, consider using Checkmyfile. Checkmyfile provides a comprehensive credit report by combining data from Experian, Equifax, TransUnion, and Crediva. This can give you a more accurate view of your credit profile and help you identify any issues that need addressing before applying for a mortgage.
Some lenders specialise in offering mortgages to individuals with bad credit. These lenders may be more flexible in their criteria.
Mortgage Lane can help you find lenders that are more likely to approve your application and advise on improving your creditworthiness.
Yes, first-time buyers can purchase a rural property with a rural mortgage. First time buyers could also be subject to bespoke mortgage products competitively priced.
Most lenders will require a minimum property value of £75,000 with rural mortgages.
Yes, you can buy a rural property even if it is not currently habitable. However, securing a standard rural residential mortgage may not be possible, as these typically require the property to be in a liveable condition. In such cases, you may need to consider a rural bridging loan. If you are buying a farm we also offer farm bridging loan solutions for borrowers looking to purchase quickly, avoid chain delays and to purchase residential farms where the residential parts are inhabitable.
A rural bridging loan is a short-term financing option designed to “bridge” the gap until you can either renovate the property to make it habitable or secure long-term financing.
Bridging loans provide temporary funds, usually for a period of 6 to 18 months, to purchase the property. They can be arranged more quickly than traditional mortgages, allowing you to secure the property without delay. They offer flexibility in terms of repayment, typically allowing for interest-only payments until the loan is repaid in full and with flexible repayment criteria will allow you to purchase and renovate properties that would otherwise be ineligible for standard rural mortgages.
Bridging loans often come with higher interest rates compared to standard mortgages. Be mindful of setup costs, including valuation fees and legal fees. It’s crucial to have a clear exit strategy, such as a plan for refinancing or selling the property once it’s habitable.
We can arrange cost-effective mortgage loans for:
- Individuals
- Special Purchase Vehicles/Limited Companies
- Limited Liability Partnerships (LLP)
- Trading companies
- Charities
- On/Offshore Trusts
Yes, rural mortgages for home purchases are regulated. When securing a residential rural mortgage, you are protected under regulations set by the Financial Conduct Authority (FCA). This ensures that lenders and brokers adhere to strict guidelines designed to protect consumers.
Residential Loans
Mortgage Lane Limited is authorised and regulated by the Financial Conduct Authority for credit broking and mortgage advice (FCA 937192). This means they must follow rules that ensure fair treatment, transparent practices, and appropriate advice for consumers.
Commercial Use
No, rural mortgages for commercial use are not regulated by the Financial Conduct Authority. This applies to properties intended for business purposes, such as:
- Equestrian centres
- Catteries
- Kennels
- Vineyards
- Glamping or campsites
- Working farms
Since commercial rural mortgages are not regulated, borrowers need to exercise additional caution. It is advisable to seek professional advice and thoroughly understand the terms and conditions of the loan.