How to fund building an agricultural dwelling

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.