Many farms are looking to build new homes on their land for succession planning to allow parents or children to live on-site, for separation or divorce, or for other reasons.
Funding such a build, particularly as the new dwelling will usually have an agricultural tie, comes with challenges that many see as unsurmountable - but they needn’t be if approached correctly.
When you approach a lender for finance for a new build, the key questions the lender will ask are:
- is it a regulated or non-regulated mortgage - put simply, is it a personal or business mortgage?
- who will own the property i.e. whose name is on the mortgage?
- how will the mortgage be repaid?
How you have planned the build, the legal aspects and the finance can often mean success or failure of a funding request.
You must get professional advice from the start - particularly from your accountant, solicitor and a specialist mortgage consultant who knows the agricultural lending market and what banks are looking for in building projects.
Banks or lenders will want to see:
- a clear, logical proposal with detailed, accurate information
- sensible budgets to build, complete and furnish the property
- evidence the builder has the necessary skills
- insurance during the build
- proof of affordability - a mix of on-farm and off-farm income is fine but realism and evidence is essential
- when you want the funds - perhaps drawn down in stages to match key stages of the build
- a contingency plan if something goes wrong including the saleability of the dwelling.
Building a house is a large investment. Professional support from the outset is crucial to ensure funding is obtained - and that the funding is cost-effective and enough to finish the build. It’s often too late to ask for advice after the build starts.