Rural mortgages: How to be approved

Rural mortgages are only offered by specialist lenders.

The main difference between these and traditional mortgages is how the lender assesses the collateral on the loan. A piece of land is deemed as riskier collateral than most properties, so you might struggle to secure finance for certain types of land.

Speak to a specialist lender

If you are struggling to get a mortgage via the traditional methods you could speak to a specialist lender. They can provide the expertise on a particular area of lending where you’re looking for assistance.

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What type of land is easiest to secure rural mortgages for?

A lender’s main concern is whether it’s possible to build property on the land you’re trying to buy. They’ll also be keen to hear whether there is access to utilities such as electricity, water or sewerage.

If this is the case, the land will be easy for the lender to sell if they have to repossess it. That makes it a less risky investment in their eyes, so you’ll find it easier to be approved for a rural mortgage with a great rate. The best thing you can do to secure a great rural mortgage is to secure planning permission to build on the land.

Many buyers try to invest in agricultural, but this is less desirable collateral for lenders, especially if it has been registered as green belt land and there is no access to utilities. This could potentially mean years for the lender to sell at the price you paid for it.

A lot of lenders won’t even consider offering rural mortgages on this type of land, while others will only consider applications from buyers with a good credit score and/or a hefty deposit. You can check your credit score here.

How long can you borrow money with a rural mortgage?

Most rural mortgages are only offered with terms of two to five years, although you may be able to negotiate affordable monthly repayments, with a balloon payment at the end of the term.

Also, if you’re planning to build on the land, it should be possible to convert this mortgage into a longer-term loan. Consider applying for a self-build mortgage, with a standard mortgage term of 25 years or more.

Can I borrow money against the land?

You can apply to borrow money against land you already own, but it’s not easy to be approved because lenders rarely see this as reliable collateral. Ultimately, the type of land you own will be key for a lender’s decision to approve your loan.

Are rural mortgages on agricultural land possible?

It is possible to gain rural mortgages on agricultural land, even though lenders are more reluctant to offer this. Here are some factors that will improve your chances of approval.

• Large deposit. The less money you need to borrow, the less risky you’ll be perceived by a lender. You’ll usually need a deposit of at least 30%. If the plot of land is highly unattractive as collateral, this could be as high as 50%. It’s common to withdraw equity from existing properties in order to finance rural mortgages.
• High income. A lender will check your recent bank statements to see if you can afford monthly repayments on your rural mortgages. If your income is high compared to your outgoings, it will improve your chances of having a rural mortgage approved.
• High credit score. Your credit score is a numerical measurement of your reliability to repay debt, so will play a key role in your eligibility for a rural mortgage. You can boost this by making timely repayments on your bills.

These three factors will improve your chances of being approved for a rural mortgage. If you’re initially rejected for a rural mortgage, it’s recommended to improve these three factors before applying again.

Can I use a bridging loan to buy land?

A bridging loan is designed to have a short term. So, it’ll only be a suitable option if you’re planning to sell or refinance the land within a few days or weeks.

It is reasonably common for buyers to use a bridging loan, while they’re waiting for planning permission to build on the land. After planning permission is granted in this scenario, the next step would be to refinance the bridging loan into development finance and/or a rural mortgage.

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