Funding land purchase

Carey7

The opportunity has arisen for me to purchase some land and a house beside me. I am totally new to this as I have never purchased land before. My question what is the best way to finance this holding. Are banks the best with a commercial mortgage or are there alternatives? Would appreciate other more experienced farmers views and experiences

Timmaay

Win the lotto? Rob a bank?

MFdaveIreland

Get a few suckler cows, ul make enough in a year......

Carey7

Should have said bank will lend - commercial mortgage over 20yrs, but my question is "are commercial mortgages the best" and what is the cheapest way to borrow money. It is more of a financial question rather than how I will raise funds

Brown Podzol

Pension backed loan. Interest and capital tax deductible. Interest only loan until pension matures and draw down 25% of pension fund to pay capital amount.

freedominacup

Brown Podzol wrote: »

Pension backed loan. Interest and capital tax deductible. Interest only loan until pension matures and draw down 25% of pension fund to pay capital amount.

Ask any of the lads who tried that pyramid scheme 25 years ago how well it worked out for them. I think some of them owed more money after five years than they did at the start. Total disaster.

caseman

Carey7 wrote: »

The opportunity has arisen for me to purchase some land and a house beside me. I am totally new to this as I have never purchased land before. My question what is the best way to finance this holding. Are banks the best with a commercial mortgage or are there alternatives? Would appreciate other more experienced farmers views and experiences

A bit more info would be needed to give advice.
Expected sale price and size of holding.

Brown Podzol

freedominacup wrote: »

Ask any of the lads who tried that pyramid scheme 25 years ago how well it worked out for them. I think some of them owed more money after five years than they did at the start. Total disaster.

Well if you pay the interest then you will only still only owe the principle. The problem is the pension fund won't perform to the extent that 25% of the final fund will not clear the principle. The OP asked for alternatives.;)

milkprofit

Carey7 wrote: »

The opportunity has arisen for me to purchase some land and a house beside me. I am totally new to this as I have never purchased land before. My question what is the best way to finance this holding. Are banks the best with a commercial mortgage or are there alternatives? Would appreciate other more experienced farmers views and experiences

Cart before horse
Figure out how much u can repay per year first
Capital not allowed against tax
20yr loan

keep going

Heard the other day where someone managed to do a crowd fund through an organization he was a member of I think he raised 400k.dont know anything about the structure of it or how it was secured.often wondered about financing land purchase through some these wealth advisers but with bank rates gone below 4 % its getting hard to see enough upside for an investor

freedominacup

Brown Podzol wrote: »

The OP asked for alternatives.;)

I assume he wanted alternatives that would result in his loan getting paid as opposed to owing more money after five years.

Zoo4m8

Carey7 wrote: »

The opportunity has arisen for me to purchase some land and a house beside me. I am totally new to this as I have never purchased land before. My question what is the best way to finance this holding. Are banks the best with a commercial mortgage or are there alternatives? Would appreciate other more experienced farmers views and experiences

I'm in the same boat here, not going to say what I've done, everybodies circumstances are different... Talk to the lenders and get a freelance financial advisor ( you won't find many of them on here) good luck..

jimmy G M

Is the house habitable? i think you'd be better off financing the land and the house on seperate loans if so. Home loans are a better rate usually, and if its your private dwelling you can sell off again in the future without capital gains tax. Downside is that less interest can be set against farm profits.
Don't allow lender to cross secure house and land if possible, maybe even seperate lenders for each plot. Either wsy you're going to need at least 20% cash going in, unless you have other collateral going in, and good off farm job, or a laying hen, or both! Best of luck.

Brown Podzol

freedominacup wrote: »

I assume he wanted alternatives that would result in his loan getting paid as opposed to owing more money after five years.

Are you thinking of an endowment mortgage. Pension backed is a different animal.

http://www.consumerhelp.ie/types-of-mortgages

freedominacup

Brown Podzol wrote: »

Are you thinking of an endowment mortgage. Pension backed is a different animal.

http://www.consumerhelp.ie/types-of-mortgages

Yep. Very different something along the lined of a hoxjersey as against a jerseyxho. Totally different.

Brown Podzol

freedominacup wrote: »

Yep. Very different something along the lined of a hoxjersey as against a jerseyxho. Totally different.

The difference is that you make contributions to your self administered personal plan which are tax deductible. You can choose where the money is invested, you can leave it in cash if you want. When you retire you can take 25% of the fund tax free to pay off the loan.

Carey7

Thank you for all the replies. Not sure of the final price yet. Approached bank and they are willing to lend commercial mortgage @ 5% but is variable. I can give my SFP over each year, have a good job along with farming and could hopefully rent house. Still 'Big Repayments'. Think I will speak to a financial advisor to see if bank is best option or are there cheaper alternatives e.g building societies etc.

freedominacup

Brown Podzol wrote: »

The difference is that you make contributions to your self administered personal plan which are tax deductible. You can choose where the money is invested, you can leave it in cash if you want. When you retire you can take 25% of the fund tax free to pay off the loan.

Providing there's something there to take. Take the purchase of 25 acres at 10k/acre with a 20% deposit. You would need 800k in your pension/endowment after I presume 20 years on top of 200k in interest paid over the twenty years. How much per year are you going to have to pay in? If your fund performs at normal levels you'll do well to have your capital at the end of the period and anything you take out above the 25% you will pay tax on at the marginal rate AFAIK. If your fund performs below normal you'll be taking money from your pension pot at the marginal rate to cover the deficit. Btw 600k of a pension pot buys you an annuity worth around 300e/week at 65.

So around €50000 per year for twenty years or 1 million in payments to cover a 200k loan and give yourself 300/week when you hit 65. It doesn't strike me as a great plan. Assuming the same interest rate in both scenarios the same loan on a 15 year term would cost what? Around 18k per year?

Dawggone

Bit of business needs doing today. Meeting owner of a farm to rattle through the nitty gritty and try to put it to bed.

I must say I really enjoy going after a sale.

Deano7

Dawggone wrote: »

Bit of business needs doing today. Meeting owner of a farm to rattle through the nitty gritty and try to put it to bed.

I must say I really enjoy going after a sale.

Good luck

milkprofit

Deano7 wrote: »

Good luck

Have u worked out what u can comfortable repay over next 15 yrs

letterkenny man

I am in the same boat myself 15 acres for sale beside the uncles place but I'm wondering what kind of loan/mortage

Dawggone

milkprofit wrote: »

Have u worked out what u can comfortable repay over next 15 yrs

Will be paid off in five.

letterkenny man

I'm in the same boat myself hoping to buy 15 acres beside the uncles place but what kind of loan/mortgage should I look for I have no land or house of my own I have some savings put away so thanks for any info

Farmer Pudsey

Carey7 wrote: »

Should have said bank will lend - commercial mortgage over 20yrs, but my question is "are commercial mortgages the best" and what is the cheapest way to borrow money. It is more of a financial question rather than how I will raise funds

Commercial Mortgage is more than likly best. Depending on interest rate. Mortgage rate for houses are high at present. On a commercial loan all interest is tax free. If you are putting some capital in the pot, consider splitting house and land.

Would need some form figures, are you working as well

Brown Podzol wrote: »

Pension backed loan. Interest and capital tax deductible. Interest only loan until pension matures and draw down 25% of pension fund to pay capital amount.

Ponzai scheme

Brown Podzol wrote: »

Are you thinking of an endowment mortgage. Pension backed is a different animal.

http://www.consumerhelp.ie/types-of-mortgages

Same ponzai different mane

keep going

Banks will lend according to what they think you can pay back and that can be 100% in cases but they will look for at least 30% cover inloan to value .eg you buy 10 acres for 100kthey may give 100k for it but they want 15 acres as security.if you dont have any assets to put as security they will require you to have 30K at least which gives them security on 10 acres at 70/30, sometimes people confuse lending and security.

Greengrass1

Dawggone wrote: »

Bit of business needs doing today. Meeting owner of a farm to rattle through the nitty gritty and try to put it to bed.

I must say I really enjoy going after a sale.

Make sure they take all there ****e with them.
Prev owner here strung us along for months pulling back sale and dirty tricks. Lucky we were only ones interested!!
Only coped on when we took back our money and said we weren't interested. Where woukd we go with a herd of cows and no farm.
10yrs later there is still crap if his around.

Dawggone

Greengrass1 wrote: »

Make sure they take all there ****e with them.
Prev owner here strung us along for months pulling back sale and dirty tricks. Lucky we were only ones interested!!
Only coped on when we took back our money and said we weren't interested. Where woukd we go with a herd of cows and no farm.
10yrs later there is still crap if his around.

Farms here are sold as a going concern. Lock, stock, and barrel.
Looking to expand your dairy empire overseas?
Two dairy yards included in the sale and I'm not interested in either. I only want the land and its a shame to see them idle.

cjpm

Buddy is buying a bit of ground, looking at getting about 25% of the price from the bank.

He's meeting someone there in the morning, and just wondering what to bring along other than the farm accounts....

Green farmer

Pity there isn't a government scheme, similiar to the shared housing ownership scheme in operation. So many guys , mad to farm, but struggling to raise the funds to buy a farm. A scheme where government own half the farm, provide a mortgage for you where you pay them interest on the loan, and rent on their half by way of a means test. Then down road you have option to buy the other half off them at a reduced rate.

milkprofit

cjpm wrote: »

Buddy is buying a bit of ground, looking at getting about 25% of the price from the bank.

He's meeting someone there in the morning, and just wondering what to bring along other than the farm accounts....

Full statement of assets and liabilities and yearly Income