Farm Mortgage and Farm Finance
What is a Farm Mortgage?
A farm mortgage is a commercial mortgage on a farm land or property, which lets them buy a farming area or raise the needed capital to finance the development of their existing business by a means of improving buildings on the farm as well as improving the land. If you are looking for a commercial mortgage on a farm property then we can help you today.
Farm Mortgage Flexibility
Many lenders have an element of flexibility as to the purposes for which farmers can use their commercial mortgage farm loan. In addition to improvements of buildings, the loan could be used to buy or lease additional land, to purchase machinery, livestock or an additional quota on milk. Other loan purposes could include buying out a business partner, who may retire, or to restructure and consolidate existing loans at a lower rate of interest.
Why Choose a Farm Commercial Mortgage?
Farm mortgages are available in a number of guises from specialist mortgage brokers and some high street banks. These include fixed rate and variable rate mortgages available for different length terms. Many offer the option of payment holidays or the ability to make underpayments or overpayments, depending on varying financial circumstances.
The Changing Farm Property Market
Traditionally, financial institutions have been happy to lend to farmers, although farmers may have been short with cash, their assets carry great value. For this reason, financial institutions were confident that farm mortgages would be profitable and that they would get their money back if the borrower were to default on the loan.
Following the increases in residential property prices, in recent years, combined with the problems that have affected the farming industry (the Common Agricultural Policy, Foot and Mouth Disease, quotas, monopolistic supermarkets, etc.), the balance between residential and agricultural property prices has shifted significantly in favour of residential property.
The values of farms in desirable areas have become more dependent on their location, closeness to amenities and communications links and less dependent on income generated directly from farming.
Farmers have been forced to diversify in order to survive. Nowadays, fewer farming families rely solely on traditional forms of farm income, so the difference between the residential and farm mortgage market is blurring. Because interest rates tend to be lower for home mortgages than for commercial mortgages, some farmers are able to borrow on the value of their house as a residence rather than as part of the overall value of the farm.
Summary
Farm mortgages allow farmers to purchase farms and develop existing farm businesses;
Farm mortgages offer more repayment flexibility than conventional mortgages;
The differences between residential mortgages and farm mortgages are diminishing.
Agriculture farm loans provide flexible, medium to long term loans aimed at helping full and part-time farmers finance capital assets or improve the economic viability of an existing farm operation.
A Farm Mortgage may allow you to:
- finance expansion or acquisition of farm land
- purchase farm equipment
- renovate or construct farm buildings
- improve farmland
- acquire quota
- Restructure existing capital.
