Remortgage Agricultural Property

Agricultural property covers a broad range of homes and land. For remortgage purposes, lenders generally consider a property to be agricultural if it includes farmland, is used for agricultural purposes, or has an agricultural tie or restriction on its use.

Common examples of agricultural properties include:

• Working farms with a farmhouse and associated land
• Smallholdings with a few acres of land
• Residential properties with agricultural ties or occupancy conditions
• Barn conversions retaining agricultural land
• Equestrian properties with paddocks and stabling
• Rural properties with more than a few acres of land

The classification of the property and land is important because it affects which lenders will consider your application. Most high street lenders have a maximum acreage they will accept, typically ranging from 5 to 10 acres. Properties with more land or with active agricultural use may require a specialist agricultural lender.

It is worth noting that even if you no longer use the land for agriculture, an agricultural tie or planning restriction can still affect your remortgage options.

Several factors make remortgaging agricultural property more challenging than a standard residential application.

Limited lender availability. Many mainstream lenders are reluctant to lend on agricultural properties, particularly those with significant acreage or active farming operations. This can reduce competition and potentially result in less favourable rates.

Valuation complexities. Agricultural properties can be difficult to value because comparable sales may be scarce. The mix of residential property, agricultural land, and outbuildings creates a complex valuation picture. Lenders may require a specialist agricultural surveyor rather than a standard residential valuer.

Agricultural ties. An agricultural occupancy condition (AOC) restricts who can live in the property, typically limiting it to someone employed in agriculture. This can significantly reduce the property's market value and the number of lenders willing to offer a mortgage.

Mixed-use considerations. If the property is used for both residential and commercial agricultural purposes, some lenders may treat it as a commercial or semi-commercial property, which falls outside standard residential lending criteria.

Environmental factors. Agricultural land may have environmental designations, contamination risks, or drainage issues that lenders need to consider. These can affect both the valuation and the willingness of lenders to offer terms.

Understanding what lenders look for can help you prepare a stronger application when remortgaging agricultural property.

Acreage limits. Most residential lenders have a maximum acreage they will lend against. This is often between 5 and 10 acres, though some may go higher. Land beyond the lender's maximum may be excluded from the security or the application may be declined entirely.

Property condition. The farmhouse or residential element needs to be in a habitable condition and meet the lender's minimum property standards. Lenders will assess the roof, walls, electrics, plumbing, and general structural integrity.

Planning and use. Lenders will want to understand the planning status of the property and any restrictions on use. Agricultural ties, listed building status, and conservation area designations can all affect the lending decision.

Income and affordability. If your income is derived from farming, lenders will assess this carefully. Self-employed farmers typically need at least two to three years of accounts. Fluctuating agricultural income can make affordability assessments more complex.

Outbuildings and ancillary structures. Barns, stables, and other outbuildings may or may not be included in the lender's security. Their condition and use will be assessed, and any commercial use may need to be declared.

Agricultural occupancy conditions (AOCs) are a significant factor when remortgaging agricultural property. These conditions are attached to the planning permission for the dwelling and restrict occupation to someone employed or last employed in agriculture or forestry.

Properties with agricultural ties typically have a lower market value than equivalent unrestricted properties, sometimes by 30 per cent or more. This reduced value directly affects how much a lender is willing to advance.

Some lenders will not consider properties with agricultural ties at all, while others will lend but at a lower loan-to-value ratio. The valuation will usually reflect the restricted nature of the property, which means you may be able to borrow less than you expect.

If you believe the agricultural tie is no longer appropriate, it may be possible to apply to your local planning authority to have it removed. This is typically done through a Certificate of Lawful Development or by demonstrating that the condition has been breached for a continuous period of 10 years. Successfully removing an agricultural tie can significantly increase the property's value and open up more remortgage options.

However, removing an agricultural tie is not guaranteed and can be a lengthy process. It is advisable to seek specialist planning advice before proceeding down this route.

While mainstream high street lenders may not always be suitable for agricultural properties, there are specialist lenders who understand the unique nature of these assets.

Agricultural mortgage lenders include traditional agricultural banks, building societies with rural lending expertise, and specialist finance providers. These lenders often have more flexible criteria when it comes to acreage, agricultural ties, and farming income.

Specialist lenders may offer products specifically designed for agricultural properties, including:

• Farmhouse mortgages with flexible acreage limits
• Lending against properties with agricultural ties
• Products that accept farming income and seasonal cash flow
• Mortgages that include outbuildings and agricultural structures

The rates from specialist lenders may be slightly higher than mainstream residential rates, but having access to a lender who understands your property type and circumstances can be invaluable. A specialist broker with experience in agricultural lending can help you access these products and compare your options across the market.

A well-prepared application can make a significant difference when remortgaging agricultural property. Here are some practical steps to help your application proceed smoothly.

Get your paperwork in order. Gather your title deeds, land registry documents, any agricultural tie documentation, planning permissions, and building regulations certificates. If you have outbuildings, have details of their construction and use ready.

Prepare your financial documents. If you are self-employed or derive income from farming, prepare at least two to three years of accounts, tax returns, and evidence of any diversified income streams. Clear financial records demonstrate to lenders that your income is sustainable.

Consider a pre-application valuation. Given the complexity of agricultural valuations, it may be worth commissioning your own valuation before applying. This can help set realistic expectations about how much you can borrow and identify any potential issues early.

Work with a specialist broker. An experienced agricultural mortgage broker can match your property and circumstances to the right lender, saving time and reducing the risk of declined applications. They will understand the nuances of agricultural lending and can present your case effectively.

Address any issues proactively. If there are maintenance issues, planning concerns, or environmental factors that could affect the valuation, consider addressing these before you apply. A property in good condition with clear documentation is far more attractive to lenders.