farming,forestry and mortgage aspirations

Jimbob91

Im 26 with a 70acre farm.
Planting 21 acres of bad ground,getting 4600circa a year in grants for forestry
in glas scheme getting 4600 also
Have 10-12k animal sales per year.
roughly 28k all in between grants sales and scheme payments.
getting 131 on farm assist.

have 50k in savings.

i just want to know what the chance are of getting a mortgage for a house at 150k.50k deposit so 100k of a mortgage.

single,no kids.with bank of ireland.

any advise welcome.

Username John

Jimbob91 wrote: »

Im 26 with a 70acre farm.
Planting 21 acres of bad ground,getting 4600circa a year in grants for forestry
in glas scheme getting 4600 also
Have 10-12k animal sales per year.
roughly 28k all in between grants sales and scheme payments.
getting 131 on farm assist.

have 50k in savings.

i just want to know what the chance are of getting a mortgage for a house at 150k.50k deposit so 100k of a mortgage.

single,no kids.with bank of ireland.

any advise welcome.

I think the new central bank rules are no mortgages are to exceed 3.5 times income.
So 28k x 3.5 = 98k

But, is that 28k profit from the farm, or is it cash into the farm? I assume its farm sales / income...

Given you are on farm assist, I assume they have calculated what your annual income is - then multiply this by 3.5, and that should tell you what the bank will give you in a mortgage...

Jimbob91

Thanks for the reply. Your right 28k would be all in with grants,sales,benefits schemes etc.

Having the forestry as an annual income of 4500 over a 15 year period along with owning the forestry at the end of that period,would that be attractive enough for a bank.

I calcualted on a 100k mortgage over 35 yrs,it amount to just below 5k a year in which the forestry would cover that.

The mature forest i have been told by my advisor would be worth 160k.

Username John

Jimbob91 wrote: »

Thanks for the reply. Your right 28k would be all in with grants,sales,benefits schemes etc.

Having the forestry as an annual income of 4500 over a 15 year period along with owning the forestry at the end of that period,would that be attractive enough for a bank.

I calcualted on a 100k mortgage over 35 yrs,it amount to just below 5k a year in which the forestry would cover that.

The mature forest i have been told by my advisor would be worth 160k.

You'd need to talk to the bank I guess...

My understanding was you could only borrow 3.5 times your annual income... as well as having a certain deposit, 20% I think, not sure...

Best of luck anyways...

Grueller

Best of luck with the application.
My thinking would be at 28k minus farm expenses you won't get a mortgage.

To be honest, and tell me to f... off if you like, but with 49 acres left after planting, my advice would be to find off farm employment. Plenty lads on here farming well over 100 acres and are employed off farm in 9 to 5 jobs. Banks look at the secure weekly/monthly income a lot more favourably than volatile farm incomes.

As I said, best of luck.

Jimbob91

Ya no i get you and that is the plan..im in college at the minute on a part time basis. Also doing the green cert. Gave up a 9-5 job to get college out of the way when i inherited the farm so come the summer id hope to be back in employment. I can only guess that an average income along with a farming income and forestry grants should see me over the line.

Just wanted to know how forestry was seen by banks as a credible thing to loan against.

Grueller

Jimbob91 wrote: »

Ya no i get you and that is the plan..im in college at the minute on a part time basis. Also doing the green cert. Gave up a 9-5 job to get college out of the way when i inherited the farm so come the summer id hope to be back in employment. I can only guess that an average income along with a farming income and forestry grants should see me over the line.

Just wanted to know how forestry was seen by banks as a credible thing to loan against.

Forestry can't be seen as any worse than farming given average farm incomes Imo.

3611

Banks will lend you 3.5 times your net profit, but to take farming income into account it's your average net profit over 3 years. It's the killer for self employed people.

Forestry is taken into account no problem but mortgage lenders have a hard time figuring out the tax free implications and how to apply it as their systems only allow for taxable income.

josephsoap

Grueller wrote: »

Best of luck with the application.
My thinking would be at 28k minus farm expenses you won't get a mortgage.

To be honest, and tell me to f... off if you like, but with 49 acres left after planting, my advice would be to find off farm employment. Plenty lads on here farming well over 100 acres and are employed off farm in 9 to 5 jobs. Banks look at the secure weekly/monthly income a lot more favourably than volatile farm incomes.

As I said, best of luck.

I would presume that the people farming over 100 acres on a part time basis are involved in dry stock and not suckler farmers?

Grueller

josephsoap wrote: »

I would presume that the people farming over 100 acres on a part time basis are involved in dry stock and not suckler farmers?

Not all. I farm 115, previously in partnership with the father but all alone now and work full time. I calve 60 to 70 suckler a year split spring and autumn. Use contractors a lot along with an easy calving bull. Calving camera linked to the phone is a godsend.

farawaygrass

3611 wrote: »

Banks will lend you 3.5 times your net profit, but to take farming income into account it's your average net profit over 3 years. It's the killer for self employed people.

Forestry is taken into account no problem but mortgage lenders have a hard time figuring out the tax free implications and how to apply it as their systems only allow for taxable income.

is the 3.5 times your net profit for mortgages only or all debts added together?

popa smurf

Jimbob91 wrote: »

Im 26 with a 70acre farm.
Planting 21 acres of bad ground,getting 4600circa a year in grants for forestry
in glas scheme getting 4600 also
Have 10-12k animal sales per year.
roughly 28k all in between grants sales and scheme payments.
getting 131 on farm assist.

have 50k in savings.

i just want to know what the chance are of getting a mortgage for a house at 150k.50k deposit so 100k of a mortgage.

single,no kids.with bank of ireland.

any advise welcome.

How in the hell are you getting a farm assist payment of 131 euro thats crazy

Timmaay

3611 wrote: »

Banks will lend you 3.5 times your net profit, but to take farming income into account it's your average net profit over 3 years. It's the killer for self employed people.

Forestry is taken into account no problem but mortgage lenders have a hard time figuring out the tax free implications and how to apply it as their systems only allow for taxable income.

Some banks will only lend the 3.5 times based on the lowest of the 3yrs, not the average, and I think it was with KBC who had the best rate by a good bit at the time, they wouldn't even consider my application because one of the years was under 30k!

Your forestry timings don't tie up - you still have 20 years of mortgage to pay after the end of the grant.

I'm sorry but you don't look like a good candidate for a mortgage - your gross income is below what banks would consider minimum for lending.

You are receiving a social welfare benefits because of your low income.

_Brian

popa smurf wrote: »

How in the hell are you getting a farm assist payment of 131 euro thats crazy

Getting farm assist is all about the books and what the net profit the books show. For op with no spouse income to account for I presume when he was means assessed he was showing maybe €70-80 a week net profit. FA is designed to top the farmer up to ~€208 or whatever the min SW payment is.

There are lads milking considerable numbers of cows and getting FA payments.

My thoughts are if the accounts are showing such low net income that OP gets farm assist then I'd expect a mortgage will be impossible as it's the same accounts the bank will be looking at to assess income for the mortgage.
My understanding is that including FA payment he will be showing maybe €210 net income, if his income is more then it's possible on the next means test his payment will be cut down or lost completly.

kerry cow

Getting a loan over the line is one thing but paying it back is quite another .The banks have a formula for a reason and stress test also .I believe after been through many borrowings over last 20yrs people should be careful what they wish for .borrow of course but leave room for years and times that won't go to plan .It is much easier to do now before you sign up to it than to try and change the circumstances after .
The banks have no mercy and want their money back and funny thing is when your struggling to pay and want to refinance all they do is jack up.the rates .what sense is in that .
Don't rush in to big sums on tight margin .be relistic on the pay back .

Fries-With-That

Jimbob91 wrote: »

Ya no i get you and that is the plan..im in college at the minute on a part time basis. Also doing the green cert. Gave up a 9-5 job to get college out of the way when i inherited the farm so come the summer id hope to be back in employment. I can only guess that an average income along with a farming income and forestry grants should see me over the line.

Just wanted to know how forestry was seen by banks as a credible thing to loan against.

Hi Jimbob,

Your 50k in the bank is your best bargaining chip. Set aside a site (seperate folio) on the farm where you want to build and have it valued by an auctioneer, you then own a site plus the 50k both are separate to the farm.

If the site is valued at a decent amount some banks will take this as an asset, banks in my experience do not like touching farms or land as collateral against a house build.

Get planning permission on the site and its value increases, sorting out the site and the planning might take you the best part of the year, by then you intend to be in full time employment, the salary from the job the 50k in savings and the valuable site with planning permission are your best route to a mortgage.

Another thing you will have to be able to prove to the bank that you are able to save ( having 50k does not mean you saved it yourself), a clean credit history and a proven ability to pay back a loan.

Best of luck with your plans.

popa smurf

_Brian wrote: »

Getting farm assist is all about the books and what the net profit the books show. For op with no spouse income to account for I presume when he was means assessed he was showing maybe €70-80 a week net profit. FA is designed to top the farmer up to ~€208 or whatever the min SW payment is.

There are lads milking considerable numbers of cows and getting FA payments.

My thoughts are if the accounts are showing such low net income that OP gets farm assist then I'd expect a mortgage will be impossible as it's the same accounts the bank will be looking at to assess income for the mortgage.
My understanding is that including FA payment he will be showing maybe €210 net income, if his income is more then it's possible on the next means test his payment will be cut down or lost completly.

Well that was my point he is trying to get a mortgage on the back of an income of 28000 and yet he has an income so low that he has to get farm assist of 130 I income for the banks and another income for SW

3611

farawaygrass wrote: »

is the 3.5 times your net profit for mortgages only or all debts added together?

This is the complicated end of it, if it is business/ farm debt hopefully the repayments are already factored into your account in the form of bank interest and depreciation or on the capital account. If it is off farm loans the 3.5 times still applies but when they calculate the ratio of your net (after tax income) to total repayments it has to be below certain levels depending on your amount of income and number of dependants.

3611

Timmaay wrote: »

Some banks will only lend the 3.5 times based on the lowest of the 3yrs, not the average, and I think it was with KBC who had the best rate by a good bit at the time, they wouldn't even consider my application because one of the years was under 30k!

Yeah they have a minimum income criteria of €30k for a single applicant. And typically avoid farmers anyway!

Jimbob91

Using assets,land and machinery as collateral, how are they all factored into a banks decision?

Username John

Jimbob91 wrote: »

Using assets,land and machinery as collateral, how are they all factored into a banks decision?

I think the bank puts more on repayment capacity than collateral...
the central bank rules state 3.5 times income is max for a mortgage... I don't know if they can relax that...
I guess if you really want a mortgage, then you could sell some asset / land / machinery - have a bigger deposit, and so need a lower mortgage...

Who2

You've 50k, get your planning, put in your footings, drive block work and roof, and you still might have enough for the windows if it's not a stupid size. By the time that's all done you'll hopefully be in a better position income wise. Your deposit will be spent but you should be able to gather enough to go for a smaller mortgage and may be able to use the build as collateral.

Timmaay

Jimbob91 wrote: »

Using assets,land and machinery as collateral, how are they all factored into a banks decision?

The bank has to go wrestle all them assets off the farmer if he defaults, and given how hard all that was with the Kingstons last year, I can see why they will basically refuse to use them as collateral.

Fries-With-That

Jimbob91 wrote: »

Using assets,land and machinery as collateral, how are they all factored into a banks decision?

Now I'm really curious, are you reading the replies people have taken the time to give you.

Jimbob91

i am indeed,lots of options,certainly 2 or 3 opinions there that have me thinking. i was in touch with the local branch there,hope to have a meeting to see what options are open to me :cool:

Bass Reeves

kerry cow wrote: »

Getting a loan over the line is one thing but paying it back is quite another .The banks have a formula for a reason and stress test also .I believe after been through many borrowings over last 20yrs people should be careful what they wish for .borrow of course but leave room for years and times that won't go to plan .It is much easier to do now before you sign up to it than to try and change the circumstances after .
The banks have no mercy and want their money back and funny thing is when your struggling to pay and want to refinance all they do is jack up.the rates .what sense is in that .
Don't rush in to big sums on tight margin .be relistic on the pay back .

TBH OP proposal is fairly viable On looking at some figures and taking a fixed period of 5 years his repayments are 400/ month. The same price of a lot of car loans. As another poster stated I would sort planning and site first. And have all my ducks in a row. I think you posted that you were in college but receiving farming income supplement.

In really think you should consider getting a job before applying for a loan. Even a job paying 20ish K/ year would change the economics of applying for that loan. I think the viability of the loan is unquestionable it is just a the repayments on a car. I do not think I would go down the road of a partial
Build and then apply for the loan. Banks are gone fussy about engineer structural reports .

House mortgage money fixed is quite good value at present and very competitive with commercial borrowing. But my main advice would be to have site, planning sorted and any sort of job.

parishsavings

If you have a low income so that you are getting Farm Assist, I would look into getting an SI House, you have the land and so can provide a site, I think you can earn a fair bit and still be eligible