If there has been one thing to come out of 2020, it has been the rise in people moving further out of city areas and onto rural properties. The global pandemic left everyone social distancing and working from home, meaning the need to be close to the city and close to work was no longer there. With the freedom to move out to cheaper areas and take advantage of more land, more space and larger properties, more and more people are looking into rural property loans.
Rural Property Loans
It’s no secret that many Aussies dream of escaping the busy hustle and bustle of city life and escaping into the country. The allure of fresh air and plenty of space to roam is is enough to convince many Australians to take the leap and make the change. Rural property loans can help bring this dream to life.
So what exactly is the difference when it comes to taking out a mortgage in a big city, versus in a rural area?
Many lenders can be much more strict when it comes to large land sizes and land that is located a long distance away from a major city. Here are some of the things you need to consider when taking out rural property loans.
Rural Property Loans: What You Need To Know
When it comes to taking out rural property loans there are a number of things you need to take into consideration when you go on the hunt for a lender.
- Land size: many lenders will only provide rural property loans for land up to 10-15 hectares in size. At the same time, other lenders will go up to 50 hectares. You will need to shop around to see what restrictions are in place with different lenders. Why is this the case? Many lenders use your property as security against the mortgage. They want a property that will be easy to onsell if you don’t meet the repayments. Unfortunately, large property can take much longer to sell and is considered much more of a risk.
- Residential or commercial: the next thing you need to consider is what you intend to use the property for. If you plan on farming and making a profit from the land, then you need to apply for an agribusiness loan, which can come with much higher interest rates. The fact is, the lender needs to know whether or not you are relying on the profits of the land in order to pay off the loan. Once again, this is considered a risk.
- Location: the less remote you are, the higher the chance of being able to take out a loan. Some areas have lending restrictions place on them and have postcode restrictions when it comes to lending.
- Services: the final thing you want to look at is how connected the property is when it comes to electricity, water and sewerage. These all add to the value of the home and make it easier to sell in the future.
Why Are Rural Properties Considered More Of A Risk
While a country move sounds ideal, which cheaper prices drawing you in, alongside all that fresh air, it does come with a downside. Whenever there is a economic shift, as we saw through the COVID-19 pandemic, farms tend to fall in value.
This is why many lenders can be much more hesitant and have stricter policies in place when it comes to offering rural property loans. But that doesn’t mean it’s impossible to take out a loan. There are plenty of lenders out there who are willing to take the risk and finance your country venture.
How To Take Out A Loan?
The best idea is to get a detailed valuation on the property you are interested in, so the lender can see how sound investment it will be. You will also need to have security to offer upon the loan. This can come in the form of your farm, as well as the equipment, such as tractors, livestock, or other income-producing factors on your farm.
The final thing you want to have ready is a deposit. Lenders can require a deposit that is as little as 5% right up to 30%. Do your research to find the best lender to suit your individual circumstances.
Get The Help You Need
If you are ready to make the move to the country, then get in contact with ALC Commercial today. We will help you find the best rural property loan for your needs, to set you up in a brand new life without any worries. With our expert knowledge, you can finance your dream home out in the country and get to work creating a whole new life for yourself.