Rural land home loans

Dreaming about clean air, peaceful mornings and night skies blanketed in stars? Whether you want to raise your kids in the great outdoors, enjoy your retirement in tranquility, or you're just frustrated with the hustle and bustle of city life, you might be considering moving somewhere more rural.

But in order to do that, you may need to look at specialised rural home loans.

How do rural home loans work?

A rural home loan is used when you want to buy a rural property, also called a hobby farm. This is different to the loan you would need if you wanted to buy a commercial farm. For that you would need a commercial loan.

A home loan for a rural property can be used for both business and personal purposes, but they can be a little difficult to gain approval for.

This is because they are generally considered higher risk than more suburban homes. It's harder for a bank to resell a rural property in the event that you can't pay your mortgage and it needs to recoup the costs. A city-based property would be far easier and quicker to sell the property and settle your debt.

It is possible to get a loan though, so don't despair. If you are looking at a hobby farm or a residential rural property and you don't plan to turn your new property into your primary source of income, a rural home loan might be just right.

How much deposit do I need for a rural property?

The deposit you'll need for a rural property will depend on the size of the property.

Lenders may allow you to borrow with a deposit as small as 5-10%, or as much as 30%, depending on the size and location of the property.

With land below 10 hectares, your loan is likely to be treated like any other residential home loan, and you may be able to borrow up to 95% of the value of the property you're purchasing.

For land up to 50 hectares you may need up to a 10% deposit. However, if you're buying land larger than this, you're likely to need a 20–30% deposit.

Properties above 100 hectares in size are unlikely to find residential home loan financing. Lenders often consider these properties to be commercial farms, even if you don't intend to produce income from farming.

What do lenders look at when you apply for a rural home loan?

Each lender will have its own set of criteria it uses to assess whether it will offer a home loan for the purpose of purchasing a rural property. Aside from land size and how you will use the land, many lenders consider:

• Land size. Lenders can be hesitant when it comes to the size of the land you're purchasing. This is because larger lots are often used for commercial farming purposes, which requires a commercial home loan. Your application is more likely to succeed if your property is under 10 hectares. The larger your rural property, the less likely you are to be approved.
• Location. Some lenders have postcode restrictions in place for rural home loans. This means if the property you are looking at purchasing is outside of the lender's approved postcodes, you may need to reconsider the property or look at another lender.
• Property Access. The property must be easily accessible for different reasons. A dirt road is appropriate and often common with rural properties, but it must be well maintained so that any vehicle that needs to can access the property.
• Public Services. The property must have access to public services such as electricity, water and sewage, if you opt to have your property completely self-sustaining it may also be useful to have all the regular services accessible at the property just to make the process of lending easier.
• Area Zoning. In order to be classified as a hobby farm rather than a commercial farm the land will need to be zoned as rural, rural residential or the equivalent depending on which state it is in. If it is zoned as industrial, commercial or for farm use this may impede your ability to get a rural home loan as it may be a commercial farm.

Pros of owning acreage

There are many reasons why people are tempted to give up life in a big city or town and move to a large country property, including:

• Space. Acreage gives you plenty of room to move, and also means you're not living on top of your neighbours.
• Relaxed lifestyle. The key words to remember here are peace and quiet.
• Opportunities for activity. From playing with animals to riding dirt bikes, fishing and just about anything else you can imagine, living on a big block of land gives you plenty of options for outdoor activity.
• Fresh air. If you're sick of the smell of car exhaust and the pollution of the city, moving to the clean, fresh air of the country could work wonders.
• Get in touch with nature. Whether you want a big, rambling garden or the natural surrounds of the Aussie bush, moving to an acreage lets you leave the urban jungle behind and indulge your passion for nature.
• Animal attraction. Want to own dogs, cats, horses, chickens and also get up close with Aussie native animals? An acreage gives you the space you need to do just that.
• Prices are lower. The further away you are from a city or major town, the more reasonable you can expect property prices to be. This means you get a lot more bang for your buck when you buy acreage.

Cons of owning acreage

However, there are some downsides to buying an acreage, so make sure you're aware of them before you sign anything.

• Maintenance. The bigger the property, the more work you'll have to do to keep it running. You need to be prepared to tackle the hard work if you want to make a go of living on acreage.
• Cost. The ongoing maintenance of a property also comes at a cost. From mowers and brush cutters to power tools, fencing, pool maintenance (if applicable) and pest control, you will need to budget for several additional expenses.
• Distance from amenities. In some parts of Australia, where you live can have an adverse effect on your ability to access phone and Internet coverage, while public transport cover is minimal or non-existent.
• Distance from work. Moving to an acreage could also lead to a long commute for many people. This problem can be avoided if you work from home or find employment closer to your new residence.
• Bushfire threat. In some parts of Australia, the threat of bushfire is very real. You may need to be prepared to deal with the risks posed by natural disasters if you live in the bush.
• Nasty wildlife. Not all Australian wildlife is cute and cuddly – you'll need to be prepared to deal with snakes.

How to apply for a rural home loan

If you have made the decision to take out a rural home loan to buy a home outside of the city, start by doing your research to find the best conditions, terms and borrowing rates.

It’s advisable to speak with a mortgage broker who understands your needs and can help steer you in the right direction.

First and foremost, plan for the future and research your possibilities. If you are set on a tree change and can feasibly afford to make the move, put the extra time into finding the rural home loan that’s right for you.

Specialist rural and agricultural lenders

Here are some companies in Australia that may be able to help you with specialist finance for different types of acreage and rural property purchases:

• Aglend. Aglend is an agricultural mortgage broker. It finds finance solutions for farmers and agricultural businesses. This includes rural land loans.
• Australian Lending Centre. This specialist lender can help with rural loans.
• Redilend. This bad credit lender also works with rural properties and hobby farms.
• Building Loans Australia. This brokerage is focused on land purchases.

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Written by

Richard Whitten

Editor

Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full bio

Richard's expertise

Richard has written 562 Finder guides across topics including:

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Co-written by

Sarah Megginson

Head of editorial

As an authority on all things personal finance, Sarah Megginson is passionate about helping you save money and make money. She is an editor and money expert with 20 years’ experience and an extensive background in property and finance journalism. Sarah holds ASIC RG146-compliant Tier 1 Generic Knowledge certification, and she's a regular media commentator, appearing weekly on TV (Sunrise, Channel 7 news, Nine news), radio (KIIS FM, Triple M, 3AW, 2GB, 6PR) and in digital and print media. See full bio

Sarah's expertise

Sarah has written 192 Finder guides across topics including:

• Home loans
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