What you need to know
The COVID-19 pandemic has caused a significant shift in the way we live and work. Many people who once worked in offices are now working from home. This has led to an increased demand for country homes, as people seek more space and a more relaxed lifestyle.
Country homes often come with higher acreage, outbuildings and other features that can be outside of the appetite of a typical bank. However, there are a number of specialist lenders who are willing to consider mortgages for country homes.
In this article, we will discuss the factors that can affect your ability to get a mortgage for a country home. We will also provide tips for finding the right lender and getting approved for a loan.
Annex on or within a property
When a property has more than one kitchen or other features that are commonly found in two separate dwellings, it can make it more difficult to get a mortgage. This is because banks are concerned that you may rent out part of the property, which would violate their terms and conditions for offering mortgage finance. In some cases, you may still be able to get a mortgage, but you may have to work with a specialist lender. The factors that will affect your chances of getting a mortgage for a property with multiple kitchens or other features commonly found in two separate dwellings include whether the annex has its own utility supply/council tax registration and if it can be accessed internally or just externally.
Dwellings on the title (lodges, cottages and large barns)
When you are looking at larger properties, you may find that they have outbuildings, such as coach houses or staff quarters. These outbuildings may be habitable and could be rented out. However, lenders may assume that you will rent out these outbuildings, even if you do not intend to do so. This is because they see the detached nature of the outbuildings as making them less disruptive to rent out. Additionally, there may be high seasonal demand for these outbuildings, which could make them even more attractive to rent out.
It is important to be clear about your intentions with the outbuildings when you are applying for a mortgage. If you do not intend to rent them out, you should let the lender know. You should also provide a detailed overview of the property and the outbuildings. This will help the lender to understand your situation and make an informed decision about your mortgage application.
Some lenders will allow you to use the outbuildings for family members, but prohibit you from renting them out. Other lenders will allow you to rent out the outbuildings, but you may have to pay a higher interest rate. It is important to shop around and compare mortgage rates before you apply for a loan.
If you are not clear about your intentions with the outbuildings, you may struggle to get a mortgage in the future. It is important to be upfront with the lender about your plans so that they can make an informed decision about your application.
Significant acreage (2-100+)
One of the attractions of owning a rural property is the opportunity to enjoy the open space. However, properties with significant acreage can be more difficult to finance. This is because lenders may be concerned about the cost of upkeep and maintenance, restrictions on the title, and commercial use of the land.
There are a number of factors that lenders will consider when assessing a property with significant acreage. These include:
- The cost of upkeep and maintenance: Lenders will want to make sure that you have the financial resources to maintain the property and the land.
- Restrictions on the title: Some properties may be subject to agricultural restrictions, which could limit their use.
- Commercial use of the land: Lenders may be concerned about the potential for commercial use of the land, which could impact the value of the property.
It is important to speak to a lender before you purchase a property with significant acreage. They will be able to assess your individual circumstances and advise you on the best course of action.
Here are some additional tips for financing a property with significant acreage:
- Get pre-approved for a mortgage before you start looking at properties. This will give you an idea of how much you can afford and will make the buying process go more smoothly.
- Work with a mortgage broker who specialises in rural properties. They will be familiar with the lending criteria of different lenders and can help you find the best deal.
- Be prepared to provide detailed information about the property and the land. This will help the lender to assess the risk of lending to you.
- Be realistic about your budget. Properties with significant acreage can be more expensive than properties in urban areas.
By following these tips, you can increase your chances of financing a property with significant acreage
Commercial activity
Commercial activity can be a challenge for many lenders. This is because they may be concerned about the risk of default if the property is not able to be resold.
There are a number of solutions that can be considered, depending on the specific property.
One option is to split the title. This means that the lender would only lend against the residential portion of the property. This can be a good option for properties that have both residential and commercial elements. However, it can be more complex to set up and may require additional fees.
Another option is to find a lender that is willing to lend on a property with commercial activity. These lenders may have more specific requirements, such as a minimum amount of residential space or a certain level of income from the commercial activity.
The best option for you will depend on the specific property and your individual circumstances. You should speak to a lender or mortgage broker to discuss your options and get pre-approved for a mortgage before you start looking at properties.
Additional tips for financing a property with commercial activity:
- Get pre-approved for a mortgage before you start looking at properties. This will give you an idea of how much you can afford and will make the buying process go more smoothly.
- Work with a mortgage broker who specializes in commercial properties. They will be familiar with the lending criteria of different lenders and can help you find the best deal.
- Be prepared to provide detailed information about the property and the commercial activity. This will help the lender to assess the risk of lending to you.
- Be realistic about your budget. Properties with commercial activity can be more expensive than properties without commercial activity.
By following these tips, you can increase your chances of financing a property with commercial activity.
How we can help
Orton Financial has experience arranging finance for complex rural properties. If you are considering purchasing or refinancing a property that falls into any of the following categories, we would be happy to discuss your options with you in a free consultation:
- Properties with significant acreage
- Properties with commercial activity
- Properties that are not in traditional residential areas
- Properties with an annexe
If you are considering purchasing or refinancing a property with an annexe, it is important to speak to a broker to discuss your options. They will be able to help you understand the risks involved and find the best financing solution for your needs.