House/Land Portfolio

hugh82

Hi, Can anyone advise me on house and land portfolios?

A brief rundown of my situation:

I am looking to buy a farmhouse with 10 acres of land. I have been told by the auctioneer that both are '1 portfolio'.

The house and land are being sold in 1 lot, so just buying the house is not an option, and I want to keep the land when its bought.

The thing with the banks is that they will give a mortgage on the house and 1 acre of land, and they will give either a personal or commercial loan for the land.

At present we are down to 1 bank. They offered us the mortgage for the house with 1 acre and then we applied for a commercial loan.

This morning I got an email from the bank, and this was part of it:

"I will have to go back to our lending team to advise them whether or not you want the house & land on the one folio.
You may want to get some advice from your solicitor on this as there is pros & cons to having it on one or on seperate folio."

Anyone know the pros & cons? Like I said, it is the same portfolio.

Kind Regards

Drift

I'm not 100% sure I follow. Is it:

a) You only need to borrow a mortgage for the house and then you have enough money yourself to buy the surrounding (agricultural I presume) land.

OR

b) You have to get a mortgage on the house and also a commercial loan to buy the land.

Either way - if you were to get the area split into two different folios. One for the house and the remainder for the land then you would probably be able to secure a mortgage for the house on the smaller folio. Thus if you ever defaulted or the bank had to seize and sell the house the land that you bought separately would be a slightly separate issue - although possibly still not "safe."

If you need two separate loans then the bank will probably make you separate it into two folios anyway.

I'm not sure if there is an advantage to keeping it all together in one folio. Or if that would even be possible with the two separate loans. There may be some or many legal reasons why it could be better or worse to keep it as one or split it. As advised by your bank - ask a GOOD solicitor about your options. If you do need to split it - it's not difficult and not particularly expensive.

hugh82

Thanks for the help. Sorry, I am not too clear on these issues/terms myself. Didn't get to contact any solicitor today.

(B) is what I mean, although the mortgage advisor said late last week that the mortgage was approved for the house only based on the house value that I was given by the selling auctioneer.

It will be a case of 2 different loans, the mortgage and personal/commercial loan over 5 years.

Thanks again for your input

Drift

Just in case it helps:

A folio is a map/documents showing a particular portion of land.

In general it would probably be seen to be administratively simpler to have all the land one owns on one folio - but the real world often intervenes - people sell, buy and borrow against various bits and pieces of land all the time which means different folios for different bits.

I don't think it's something you need to worry about unduly. Like I said - get a good solicitor (and possibly a good accountant also) to advise you and then follow their advice. If you need to do new folio or land transfer maps engage a good engineer/surveyor.

Rabbo

If you have the option, it makes sense to minimise the mortgaged property and split the proerty into two plans/folios. As previously mentioned, if you happened to default on the mortgage, the remainder of the land wouldn't be at risk. there will be a cost involved in getting an engineer/surveyor to prepare the necessary map.