Loan for land

sf1994

Just a quick question. Is it hard to get a farm loan say for around 150k. I am not long out of college and earn around 25k a year. I could use some of my savings 25-30k. Land might make 150k plus. I am living at home for now and could payback 10-12k a year. Would it be possible to even think of placing a bid?

wrangler

sf1994 wrote: »

Just a quick question. Is it hard to get a farm loan say for around 150k. I am not long out of college and earn around 25k a year. I could use some of my savings 25-30k. Land might make 150k plus. I am living at home for now and could payback 10-12k a year. Would it be possible to even think of placing a bid?

€10 - 12K wouldn't even cover a 15 year loan, you should consider buying a house, far better investment.
Your circumstance will probably change a lot in 15 years, you might be glad of a house

sf1994

wrangler wrote: »

€10 - 12K wouldn't even cover a 15 year loan, you should consider buying a house, far better investment.
Your circumstance will probably change a lot in 15 years, you might be glad of a house

Would rather have the land. Horses for courses and all that:pac:

krissovo

sf1994 wrote: »

Just a quick question. Is it hard to get a farm loan say for around 150k.?

It can be easy or hard depending on the circumstances I found. I recently bought a 77 acre family farm, going for a loan unprepared you will have no hope unless you do your homework.

I got a Land purchase Agri loan but the agreement was focused on the potential of the land plus securities I had in place. It took some time to prepare but once I had a validated business case on how the land can pay for itself it was simple to get the loan. Having a separate salary helps with their risk assessment so anything made from the land can go towards the loan.

As a FYI I have not made a single cent from the land in profit to date and in fact I am still using my own money just to maintain it.

893bet

sf1994 wrote: »

Just a quick question. Is it hard to get a farm loan say for around 150k. I am not long out of college and earn around 25k a year. I could use some of my savings 25-30k. Land might make 150k plus. I am living at home for now and could payback 10-12k a year. Would it be possible to even think of placing a bid?

I would say zero chance based on those figures.

Wildsurfer

Does the land have any earning potential eg adding it to an existing dairy enterprise with the possibility of carrying extra cows? If a stand alone venture just to keep a few hobby cattle/horse etc I would say you would struggle to get approved for a loan.

sf1994

krissovo wrote: »

It can be easy or hard depending on the circumstances I found. I recently bought a 77 acre family farm, going for a loan unprepared you will have no hope unless you do your homework.

I got a Land purchase Agri loan but the agreement was focused on the potential of the land plus securities I had in place. It took some time to prepare but once I had a validated business case on how the land can pay for itself it was simple to get the loan. Having a separate salary helps with their risk assessment so anything made from the land can go towards the loan.

As a FYI I have not made a single cent from the land in profit to date and in fact I am still using my own money just to maintain it.

Thanks for your reply. I know I might not be in a strong position at the moment but the way I look at it is I wont be needing a house or anything for the next 5 years plus and the land might start making some little bit of profit after 10-15 years when I might need it. I have a good understanding of farm schemes and I would enter whatever's needed to help pay off the loan. There is also good road frontage for a site or two if needed for sale.

jntsnk

sf1994 wrote: »

Thanks for your reply. I know I might not be in a strong position at the moment but the way I look at it is I wont be needing a house or anything for the next 5 years plus and the land might start making some little bit of profit after 10-15 years when I might need it. I have a good understanding of farm schemes and I would enter whatever's needed to help pay off the loan. There is also good road frontage for a site or two if needed for sale.

If you are banking on sites, I’d check it out first. Preplanning meeting with the Council, as they and the greens are preventing a lot of one off houses going up.

Donald Trump

sf1994 wrote: »

Just a quick question. Is it hard to get a farm loan say for around 150k. I am not long out of college and earn around 25k a year. I could use some of my savings 25-30k. Land might make 150k plus. I am living at home for now and could payback 10-12k a year. Would it be possible to even think of placing a bid?

150k means over 11k in stamp duty unless you qualify for relief (or obtain that within 5 years)


You'll have other fees as well such as legal. I don't know how much they'd cost. But probably large enough that you'd probably notice it if it comes out of your 30k.



What will the land make you per year if you rent it out?

Donald Trump

jntsnk wrote: »

If you are banking on sites, I’d check it out first. Preplanning meeting with the Council, as they and the greens are preventing a lot of one off houses going up.

Councils generally won't do preplanning meetings if you are not already the owner of the land.

sf1994

Donald Trump wrote: »

150k means over 11k in stamp duty unless you qualify for relief (or obtain that within 5 years)


You'll have other fees as well such as legal. I don't know how much they'd cost. But probably large enough that you'd probably notice it if it comes out of your 30k.



What will the land make you per year if you rent it out?

Fairly Good land. around 200 hundred an acre

Donald Trump

sf1994 wrote: »

Fairly Good land. around 200 hundred an acre

Lets say it's 15 acres @10k a year (all in, including stamp duty and legal fees ... so lets say you get it for 135k + the rest) and 200/ac a year income if you avail of the long term lease income tax exemption. That's a 2% (3k) per annum return on your investment.



Your interest payment for loan is probably going to be higher. So you are depending on capital appreciation.


If you want to buy it, and you can, sure fire away. I can't know the likelihood of you getting a loan for it. I'd imagine that you won't be getting house mortgage interest rates either. I genuinely don't know. I never approached a bank with any sort of proposal.


You might alternatively want to keep your savings to hand in case you want to feck off for a year travelling at some stage when this pandemic is over. You wouldn't have a field then but you only live once. You're happy enough living at home now. You might not be in 5 years. You might be earning more then though. That is another factor into your equation - the stability and opportunities in your profession. If you are on 25k now because you are training to be an accountant, that is on average, a better position to be taking on risk than someone on 25k working in a shop (no offence to anyone working in a shop)

J.O. Farmer

Donald Trump wrote: »

150k means over 11k in stamp duty unless you qualify for relief (or obtain that within 5 years)

You'll have other fees as well such as legal. I don't know how much they'd cost. But probably large enough that you'd probably notice it if it comes out of your 30k.

What will the land make you per year if you rent it out?

You will probably need 30% deposit or additional security. So 45k for 150k land loan.

Legal fees will be your solicitor and the banks solicitor + expenses. Could be 5k, maybe more if you are putting up another asset as security instead of a cash deposit.

You'll also likely have to pay for a valuation for the bank say €100.

Stamp duty is 7.5% so 10.25k unless you're exempt. Even if you qualify at a later date it'll have to be paid up front and reclaimed. Don't think you can defer.
If you're not the sole owner you won't be able to get stamp duty exemption unless all owners qualify.

Best thing to do is call into your bank and have a chat about what would be required.

sob1467

As other posters have remarked, you really have to sit down and list out a few things:

Cost Of Land
Actaul Cost: 150,000 (Minimum)
Stamp Duty 11,250 (@7.5%)
Fees for Solicitor/Valuer/Bank 5,000
Total Cost: 166,250

Bank Loan
Money Required 166,250
Deposit Available 30,000 (18%)
Loan Required 136,250

It is probably unlikely that a bank will give you a loan to that value without a higher deposit, and unless you have other security to tie up (Other farmland etc.) Any bank will also require detailed forward looking financial statements from you, and preferably historical accounts as well, to increase your likelyhood of giving you money.

But for the sake of it, say the bank do provide you a loan at say 9%:

Possible Interest Rate 9%
Loan Amount 136,250
Loan Term 15 Years
Loan Interest per year: 12,300
Loan Capital to be repaid in year 1: 9,000 (136,250/15)
This means at the end of year 1 you will have to pay the bank 21,300 (9,000+12,300)

Each year you will have to continue to pay the capital (Loan divided by 15years and the interest: Loan Amount * 9%)

Your financial situation
Gross Salary 25,000
Net Salary 22,000
Car Costs 4,000 (Assuming you've a car)
General Expenses 5,200 (€100*52 - Do not think €100 a week is excessive for food, entertainment, clothes etc etc etc)
Salary less expenses 12,800
Amount due to bank at end yr 1 Interest & Capital 21,300

I have no idea how many acres you are buying and the potential rental income it would bring in, but just looking from what you have said, unfortunately it really does not look like a viable option for you to buy the farm.

At your age, I would really not recommend going to borrow to the hilt to fund a farm that may not get you anything back. You would be way better of buying a good masters degree or some other decent training course that will help increase your salary, so then you can go out and buy land without the need for banks with a big noose around your neck.

Dickie10

i agree with above poster, get a masters and be able to earn 10k more this will really transform your bargaining power. i am in the same boat, i will be looking for land to buy in the long term, im now in a professional secure job earning 36k potential for increases/promotion, the farm this year earned 50k profit, so getting screwed badly on tax this year. I will wait for the right plot to come up though, if all goes pear shaped can always sell off a portion if needs be. Luckily though I have a family home so wont be needing a mortgage for a house, whatare peoples thoughts? should i keep squirrelling money away and would say 100k cash be good bargaining power for 350k loan? i would imagine lots of people take out 300-350 k mortgages in more precarious jobs?

30-40 ACRES would be nice. land around me from 8-10k /acres, very rare over 10k. not massive dairy country, as i said before its an area of a lot of rented out farms, very few family farms still intact as running businesses so perhaps a chance to buy very good quality land very close to me in near enough future. Currently 4 farms totaling near 700 acres most mearning me and all set out on various letting aragaenments.

duffysfarm

Very detailed post and you raise some good points but 9% interest on a land loan?

sob1467 wrote: »

As other posters have remarked, you really have to sit down and list out a few things:

Cost Of Land
Actaul Cost: 150,000 (Minimum)
Stamp Duty 11,250 (@7.5%)
Fees for Solicitor/Valuer/Bank 5,000
Total Cost: 166,250

Bank Loan
Money Required 166,250
Deposit Available 30,000 (18%)
Loan Required 136,250

It is probably unlikely that a bank will give you a loan to that value without a higher deposit, and unless you have other security to tie up (Other farmland etc.) Any bank will also require detailed forward looking financial statements from you, and preferably historical accounts as well, to increase your likelyhood of giving you money.

But for the sake of it, say the bank do provide you a loan at say 9%:

Possible Interest Rate 9%
Loan Amount 136,250
Loan Term 15 Years
Loan Interest per year: 12,300
Loan Capital to be repaid in year 1: 9,000 (136,250/15)
This means at the end of year 1 you will have to pay the bank 21,300 (9,000+12,300)

Each year you will have to continue to pay the capital (Loan divided by 15years and the interest: Loan Amount * 9%)

Your financial situation
Gross Salary 25,000
Net Salary 22,000
Car Costs 4,000 (Assuming you've a car)
General Expenses 5,200 (€100*52 - Do not think €100 a week is excessive for food, entertainment, clothes etc etc etc)
Salary less expenses 12,800
Amount due to bank at end yr 1 Interest & Capital 21,300

I have no idea how many acres you are buying and the potential rental income it would bring in, but just looking from what you have said, unfortunately it really does not look like a viable option for you to buy the farm.

At your age, I would really not recommend going to borrow to the hilt to fund a farm that may not get you anything back. You would be way better of buying a good masters degree or some other decent training course that will help increase your salary, so then you can go out and buy land without the need for banks with a big noose around your neck.

Turbohymac

As previous posters already posted..without any current or future decent return from this land..150k loan and interest will put you under undue financial pressure and for absolutely no return...at least a house could be rented out if it were in the right location..
You could extend the term of the loan way up to 25 or 30 years but without a exact business plan it's a dead investment..
Don't make the mistake of dreaming up returns from land..even if the bank gave you the loan you would need to make hefty monthly repayments and the banks wouldn't give a crap if you couldn't make enough from the land to meet the requirements..and if you're simply dreaming about spending your wages from a day job to prop up bank repayments then you're clearly at nothing.
Good luck

K.G.

Land loans can be got from 3 to 4 % but that would only be available to strong proposals.there is absolutely nothing wrong with going through the process of applying for a loan as you will know exactly where you stand on this proposal and you will know how the process works for the future.

sob1467

duffysfarm wrote: »

Very detailed post and you raise some good points but 9% interest on a land loan?

Yeah I agree it was a bit on the high side, but the higher the risk for the bank the higher the interest. The risk from the bank here with no security, no previous financial history, no high off-farm income would all unfortunately contribute to a higher interest rate.



I also don't think many banks would give out a farm loan based on what I am assuming are the circumstances here, I was quoting more the going rate of personal loans. They are around 8%-10% over 10ish years.


Granted farm loans can be got at 3%-5%, but that would be with enterprises that have more financial backing, securities etc with them.


By all means though let the original poster talk to his bank to see what they say, and see what the process of applying for a loan may look like though.

Mooooo

Basically what the bank want will be repayment capacity and / or security. If you have enough of a deposit that the land value will be high enough over the loan amount the land may do as security on its, otherwise they will prob want more.
Repayment capacity can come from either your work or a proper realistic business plan showing how you will afford the repayments.
More than likely in a case like this they will want you to be able to show you can make the repayments from your main employment given your lack of history farming so at 25k income that would be unlikely tbh.
Would prob be worth your while looking at other investments for the time being

Bass Reeves

sob1467 wrote: »

As other posters have remarked, you really have to sit down and list out a few things:

Cost Of Land
Actaul Cost: 150,000 (Minimum)
Stamp Duty 11,250 (@7.5%)
Fees for Solicitor/Valuer/Bank 5,000
Total Cost: 166,250

Bank Loan
Money Required 166,250
Deposit Available 30,000 (18%)
Loan Required 136,250

It is probably unlikely that a bank will give you a loan to that value without a higher deposit, and unless you have other security to tie up (Other farmland etc.) Any bank will also require detailed forward looking financial statements from you, and preferably historical accounts as well, to increase your likelyhood of giving you money.

But for the sake of it, say the bank do provide you a loan at say 9%:

Possible Interest Rate 9%
Loan Amount 136,250
Loan Term 15 Years
Loan Interest per year: 12,300
Loan Capital to be repaid in year 1: 9,000 (136,250/15)
This means at the end of year 1 you will have to pay the bank 21,300 (9,000+12,300)

Each year you will have to continue to pay the capital (Loan divided by 15years and the interest: Loan Amount * 9%)

Your financial situation
Gross Salary 25,000
Net Salary 22,000
Car Costs 4,000 (Assuming you've a car)
General Expenses 5,200 (€100*52 - Do not think €100 a week is excessive for food, entertainment, clothes etc etc etc)
Salary less expenses 12,800
Amount due to bank at end yr 1 Interest & Capital 21,300

I have no idea how many acres you are buying and the potential rental income it would bring in, but just looking from what you have said, unfortunately it really does not look like a viable option for you to buy the farm.

At your age, I would really not recommend going to borrow to the hilt to fund a farm that may not get you anything back. You would be way better of buying a good masters degree or some other decent training course that will help increase your salary, so then you can go out and buy land without the need for banks with a big noose around your neck.

First off do not give advice on loan repayments unless you understand the way they work. Banks never divide the capital by the no of years of the loan and add interest then. In general they fix the payments combining capital and interest into equal.payments over the number of years of the loan.

As well no mainstream bank would charge you 9% on a long term secured loan at present.5-6% would be max . On general it best to fix the rate over 5 years to give yourself security on OP's case. In general while they charge for extra risk there is a point beyond which they will not charge extra interest as the risk is outside loan criteria.
In OP case my assumption is that they will not give him the loan as he is trying to borrow 5-6 times earning with no record of understanding farming. However if they did and if he managed to get the loan I expect on a secured loans over 15-20 years the highest interest rate would be 5-6%. I am expect that any bank would insist on a 20 year term so as that OP would have lower payments.

The rough calculation on interest on a loan is the number of years in this case say 20 divided by two which is 10. You multiple this by the loan required and fractionalize the percentage.
Assuming a 5.5% rate over 20years the calculation is as follows.

10X136000X0.055 = 74800in total interest over 20years.

Add this to capital loan 136k+74.8k=210.8k in loan and capital repayments over 20years.

Payments 10540 euro per year or about 880/month. On top of this any bank will want you to have a life insurance policy a term one over 40years for 250k will be about 20-30/month

While the above way of calculating interest is not 100% accurate it will give an indication with in 10-15 euro/ month on repayments on a loan that size. A further note is that Credit unions are starting to enter that type of loan market. In a banks are not overly interest in 150k secured loans and charge a margin for it. A credit union if you secured such a loan from it would charge 4ish% and if you were tough to bargain they might better it if you were financially secure. However OP would again be outside the criteria.

Tonynewholland

No mention of how many acres but if it’s 10/15 I think this is a great move for a young person just finished college and starting out in life. To have that kind of money saved already is good going and the bank will see it that way also. Having a site to build a house in time. Money in the bank isn’t going to do much for the foreseeable future

sob1467

Bass Reeves wrote: »

First off do not give advice on loan repayments unless you understand the way they work. Banks never divide the capital by the no of years of the loan and add interest then. In general they fix the payments combining capital and interest into equal.payments over the number of years of the loan.

As well no mainstream bank would charge you 9% on a long term secured loan at present.5-6% would be max . On general it best to fix the rate over 5 years to give yourself security on OP's case. In general while they charge for extra risk there is a point beyond which they will not charge extra interest as the risk is outside loan criteria.
In OP case my assumption is that they will not give him the loan as he is trying to borrow 5-6 times earning with no record of understanding farming. However if they did and if he managed to get the loan I expect on a secured loans over 15-20 years the highest interest rate would be 5-6%. I am expect that any bank would insist on a 20 year term so as that OP would have lower payments.

The rough calculation on interest on a loan is the number of years in this case say 20 divided by two which is 10. You multiple this by the loan required and fractionalize the percentage.
Assuming a 5.5% rate over 20years the calculation is as follows.

10X136000X0.055 = 74800in total interest over 20years.

Add this to capital loan 136k+74.8k=210.8k in loan and capital repayments over 20years.

Payments 10540 euro per year or about 880/month. On top of this any bank will want you to have a life insurance policy a term one over 40years for 250k will be about 20-30/month

While the above way of calculating interest is not 100% accurate it will give an indication with in 10-15 euro/ month on repayments on a loan that size. A further note is that Credit unions are starting to enter that type of loan market. In a banks are not overly interest in 150k secured loans and charge a margin for it. A credit union if you secured such a loan from it would charge 4ish% and if you were tough to bargain they might better it if you were financially secure. However OP would again be outside the criteria.

First off after putting the effort in of doing up the figures for the OP, I would appreciate you not preaching about that I shouldn't be giving loan repayments advice as according to you I do not understand them...


I do understand how loans work and it was for simplification purposes that I divided the loan amount by the loan term to give him an approximate estimate of capital to be repaid in year one. Plus regarding interest multiplying the loan amount by the interest rate also approximately gives you the correct amount.


My numbers are largely correct. If you want you can put them into an online amortization calculator (https://www.amortization-calc.com/mortgage-refinance-calculator/), (Loan Amt: 136,250, Int. Rate: 9%, Term: 10y) this will give you a total of interest and capital in year 1 of 20,711 in my post I stated it would be 21,300.

Regarding interest rates, I stated that 9% is on the high side. There are a however currently a number of credit unions offering farming loans in the area of 6-8%. If the OP somehow gets the capital they are after it will be at a highish rate of interest.

Bass Reeves

sob1467 wrote: »

First off after putting the effort in of doing up the figures for the OP, I would appreciate you not preaching about that I shouldn't be giving loan repayments advice as according to you I do not understand them...


I do understand how loans work and it was for simplification purposes that I divided the loan amount by the loan term to give him an approximate estimate of capital to be repaid in year one. Plus regarding interest multiplying the loan amount by the interest rate also approximately gives you the correct amount.


My numbers are largely correct. If you want you can put them into an online amortization calculator (https://www.amortization-calc.com/mortgage-refinance-calculator/), (Loan Amt: 136,250, Int. Rate: 9%, Term: 10y) this will give you a total of interest and capital in year 1 of 20,711 in my post I stated it would be 21,300.

Regarding interest rates, I stated that 9% is on the high side. There are a however currently a number of credit unions offering farming loans in the area of 6-8%. If the OP somehow gets the capital they are after it will be at a highish rate of interest.

You stated on your original post that your calculations was for a 15 loan term. Read your original post. That what you did your calculations off. The error you made was in your capital part of the loan repayments.

The repayments on a 136k loan over 15 years is 15200/year or 1270/ month. You gave over 21k of repayments over 15year on year one. That 6k higher than a 9% rate would give you.

Yes CU charge 6-8% on certain farm loans. These are unsecured and are stocking, machinery or similar loans. They are.uncompeditive for unsecured not to mind secured borrowing.

I stand over my comments unless you understand the way interest is calculated it pointless giving repayment rates. There a huge difference between repayment rates depending on interest rate and term of loan as well as devoted.

The figures you have would put a person on a 50k salary off borrowings that amount even though he be well capable of the repayments.

As well OP said he felt he was as capable of repaying 10-12k a year. I would question that assumptions. However on a 15 year term at an interest rate of 3.5% the repayments would be in that ballpark

PoorFarmer

I was in a similar situation a few years back. Would be a good bit older but was earning around 33k and was buying land worth 200k. Had to borrow 80k and all the major banks were only lending at 7.75% as I had no previous farm earnings that I could show them. No way were they dropping below this when I was looking for the loan on my own. If I went with my partner (public sector nurse) rate would have been 3.5% with BOI. As we had plans of getting a mortgage in the following few years I ploughed on by myself. So 9% I imagine is a possibility when it comes to interest rates.

Since managed to review the loan and bring down the rate when we played hardball over the mortgage. All the major players will pull an interest rate out of their ar5e if you have no previous earnings from the business and especially with a lower income to finance it.

krissovo

PoorFarmer wrote: »

Had to borrow 80k and all the major banks were only lending at 7.75% as I had no previous farm earnings that I could show them.

7.75% was the same rate I got and it was because I had no previous farm earnings. I am now at 5.5% after some re-negotiation after the land started making regular income.

sob1467

Bass Reeves wrote: »

You stated on your original post that your calculations was for a 15 loan term. Read your original post. That what you did your calculations off. The error you made was in your capital part of the loan repayments.

The repayments on a 136k loan over 15 years is 15200/year or 1270/ month. You gave over 21k of repayments over 15year on year one. That 6k higher than a 9% rate would give you.

Yes CU charge 6-8% on certain farm loans. These are unsecured and are stocking, machinery or similar loans. They are.uncompeditive for unsecured not to mind secured borrowing.

I stand over my comments unless you understand the way interest is calculated it pointless giving repayment rates. There a huge difference between repayment rates depending on interest rate and term of loan as well as devoted.

The figures you have would put a person on a 50k salary off borrowings that amount even though he be well capable of the repayments.

As well OP said he felt he was as capable of repaying 10-12k a year. I would question that assumptions. However on a 15 year term at an interest rate of 3.5% the repayments would be in that ballpark

Ok one last reply to you. Not worth totally derailing this thread but that 21,300 was clearly not all capital as you're suggesting. I made it clear as day that it the 21,300 was made up of Capital (9,000) and Interest:(12,300).

Anyhow as the old saying goes "Never argue with a fool; onlookers may not be able to tell the difference."

Bass Reeves

sob1467 wrote: »

Ok one last reply to you. Not worth totally derailing this thread but that 21,300 was clearly not all capital as you're suggesting. I made it clear as day that it the 21,300 was made up of Capital (9,000) and Interest:(12,300).

Anyhow as the old saying goes "Never argue with a fool; onlookers may not be able to tell the difference."

I never said it was all capital. I said that the error you made was on the capital part of the repayments. On a load over 15years you capital repayments on year one would be a bit less than 3k and about over 12k in interest. In year 15 your capital repayments would beslightly less than14k and about 1300 in interest.

I am not arguing with you I am explaining the way a loan interest is calculated and how repayments are calculated so that I less interest rates change payments remain the same. It exactly the same with a car loan or a mortgage only the interest rate is different.

It seems to have passed over your head.

Bass Reeves

PoorFarmer wrote: »

I was in a similar situation a few years back. Would be a good bit older but was earning around 33k and was buying land worth 200k. Had to borrow 80k and all the major banks were only lending at 7.75% as I had no previous farm earnings that I could show them. No way were they dropping below this when I was looking for the loan on my own. If I went with my partner (public sector nurse) rate would have been 3.5% with BOI. As we had plans of getting a mortgage in the following few years I ploughed on by myself. So 9% I imagine is a possibility when it comes to interest rates.

Since managed to review the loan and bring down the rate when we played hardball over the mortgage. All the major players will pull an interest rate out of their ar5e if you have no previous earnings from the business and especially with a lower income to finance it.

krissovo wrote: »

7.75% was the same rate I got and it was because I had no previous farm earnings. I am now at 5.5% after some re-negotiation after the land started making regular income.

I borrowed to buy land 18 years ago. I had no farming record. I drew up a short uncomplicated business plan. Showed it to the bank manager I drew down about 4 times income. Interest rate was 2% with bank cost of funds a commercial tracker. After12 months I moved Rabo bank and a year after than I drew down over twice more in income. Interest rate was 1.5% with cost of funds.

At that time borrowing costs were approximately 3.5-4% inc cost of funds. Highest it went to was 6% however from about 2014-2019 when first loan was paid off interest rate was 1.25%.

Second loan has 4 years left I could clear it but interest rate is so.low it virtually free money

Mooooo

Bass Reeves wrote: »

I borrowed to buy land 18 years ago. I had no farming record. I drew up a short uncomplicated business plan. Showed it to the bank manager I drew down about 4 times income. Interest rate was 2% with bank cost of funds a commercial tracker. After12 months I moved Rabo bank and a year after than I drew down over twice more in income. Interest rate was 1.5% with cost of funds.

At that time borrowing costs were approximately 3.5-4% inc cost of funds. Highest it went to was 6% however from about 2014-2019 when first loan was paid off interest rate was 1.25%.

Second loan has 4 years left I could clear it but interest rate is so.low it virtually free money

Getting money in the early noughties was a lot different to getting money post 08/09. They may have improved in recent years but they are taking the piss with margin over cost of funds tbh. Last number of years have been low interest rates but if policy makers figure out a way to get things going again and interest rates rise the margins they have of 3% wouldn't be long pushing rates up over the term of a loan

Bass Reeves

Mooooo wrote: »

Getting money in the early noughties was a lot different to getting money post 08/09. They may have improved in recent years but they are taking the piss with margin over cost of funds tbh. Last number of years have been low interest rates but if policy makers figure out a way to get things going again and interest rates rise the margins they have of 3% wouldn't be long pushing rates up over the term of a loan

I agree however we are entering a time when borrowing is getting cheaper. 5year fixed mortgage rates are hitting 2.5%. in general small to mid sized secured farm loans(100-300k) should be within 0.5-1%if that rate. This was what was happening in the early noughties.

However farm lending is not helped by irresponsible journalism. Headline in the rag this week. Vulture fund makes million from farm loans. It about the loans that Rabo bank sold. Pepper finance is managing them for the funds that bought them.

They print that the loan book was valued at 3.2 billion, it was bought for 800 million and in the accounts for three months it collected 11 million in repayments of which 4.4 million was interest. That about 44 million a year in repayments and 13.5 million would be interest

I imagine some of the loans are historical and will never be recovered. On 800 million 13.5 million gives an interest rate of 1.6%. 30 million in capital repayments will take about 20 years for the buyers Goldman's Sachs and a crowd I never heard of Car Val. Now my loan is with them bits it repaid by 2025. The buyers will have to work hard to make a decent return on there there money unless the 3 month period was an anomaly on repayments.

However back to lending CU have only about 40-50% of money on deposit lend out. The rest they have on deposit which they are paying banks or government bonds money to mind. It would be in there interest to lend secured loans at 3-4%. I see they are starting to enter the mortgage business at present. I cannot but see lending rates drop in the short term. If I had or was looking for a secured loan I be looking at rates in the 3% bracket

morphy87

Bass Reeves wrote: »

I agree however we are entering a time when borrowing is getting cheaper. 5year fixed mortgage rates are hitting 2.5%. in general small to mid sized secured farm loans(100-300k) should be within 0.5-1%if that rate. This was what was happening in the early noughties.

However farm lending is not helped by irresponsible journalism. Headline in the rag this week. Vulture fund makes million from farm loans. It about the loans that Rabo bank sold. Pepper finance is managing them for the funds that bought them.

They print that the loan book was valued at 3=2 billion, it was bought for 800 million and in the accounts for three months it collected 11 million in repayments of which 4.4 million was interest. That about 44 million a year in repayments and 13 5 million would be interest

I imagine some of the loans are historical and will never be recovered. On 800 million 13.5 million gives an interest rate of 1.6%. 30 million in capital repayments will take about 20 years for the buyers Goldman's Sachs and a crowd I never heard of Car Val. Now my loan is with them bits it repaid by 2025. The buyers will have to work hard to make a decent return on there there money unless the 3 month period was an anomaly on repayments.

However back to lending CU have only about 40-50% of money on deposit lend out. The rest they have on deposit which they are paying banks or government bonds money to mind. It would be in there interest to lend secured loans at 3-4%. I see they are starting to enter the mortgage business at present. I cannot but see lending rates drop in the short term. If I had or was looking for a secured loan I be looking at rates in the 3% bracket

Very good input again with very good detail,if you were going for a loan to purchase some land how would you go comparing banks price wise? Would you have to have an account with a bank to compare rates?or would a bank be hessiant about giving money to someone they never dealt with before even if your record was 100% with your own bank

Bass Reeves

morphy87 wrote: »

Very good input again with very good detail,if you were going for a loan to purchase some land how would you go comparing banks price wise? Would you have to have an account with a bank to compare rates?or would a bank be hessiant about giving money to someone they never dealt with before even if your record was 100% with your own bank

Banks will deal with anyone. As now you will have to furnish them with bank account details going back 2-3 years, very easy with online banking. As well they can see your history of spending and any repayment history. They can see savings record or lack of it. Biggest issue I see is there inability to read accounts. In theory you might have very low income from a farm but this may be because you have serious capital allowances or lifestyle spending may be hidden within the farm accounts. You may need to point this out to a bank lending official.

For instance 2/3 of car expenses, telephone and ESB may all be going through the account. A child college fees. There may be a 15-20k car purchased last year by a straight payment which may shield 1.5-2k in income every year. A child of 18 maybe going to college but on the farm books as an employee for the 2-3 years with 20-25k towards college costs put aside.

If your finances are strong but shielded they will talk to you. But you need to be able to explain you accounts and you ability to manage repayments as opposed to repayment capacity.

The real factor with loan repayments is not the capability to repay but the capability to manage repayments. It's an area that is not allowed for in all the BS you have to fill out since the local bank manager ceased to exist

morphy87

Bass Reeves wrote: »

Banks will deal with anyone. As now you will have to furnish them with bank account details going back 2-3 years, very easy with online banking. As well they can see your history of spending and any repayment history. They can see savings record or lack of it. Biggest issue I see is there inability to read accounts. In theory you might have very low income from a farm but this may be because you have serious capital allowances or lifestyle spending may be hidden within the farm accounts. You may need to point this out to a bank lending official.

For instance 2/3 of car expenses, telephone and ESB may all be going through the account. A child college fees. There may be a 15-20k car purchased last year by a straight payment which may shield 1.5-2k in income every year. A child of 18 maybe going to college but on the farm books as an employee for the 2-3 years with 20-25k towards college costs put aside.

If your finances are strong but shielded they will talk to you. But you need to be able to explain you accounts and you ability to manage repayments as opposed to repayment capacity.

The real factor with loan repayments is not the capability to repay but the capability to manage repayments. It's an area that is not allowed for in all the BS you have to fill out since the local bank manager ceased to exist

So if your accounts don’t look great but you have a lot of savings they will be willing to negotiate?

And your right about the way banks operate now,I know plenty people that borrowed a lot of money through the years and they had a great working relationship with there local bank manager, easy to talk to and had some common sense compared to now your talking to someone in Dublin

Gman1987

K.G. wrote: »

Land loans can be got from 3 to 4 % but that would only be available to strong proposals.there is absolutely nothing wrong with going through the process of applying for a loan as you will know exactly where you stand on this proposal and you will know how the process works for the future.

Need to look into a potential land loan this week. Is it just AIB and BOI that do land loans or is their anyone else I should be approaching? Circa. 400k loan

MIKEKC

Donald Trump wrote: »

150k means over 11k in stamp duty unless you qualify for relief (or obtain that within 5 years)


You'll have other fees as well such as legal. I don't know how much they'd cost. But probably large enough that you'd probably notice it if it comes out of your 30k.



What will the land make you per year if you rent it out?

How do you qualify for stamp duty relief on buying land. Do you need to be under 35?

Hard Knocks

MIKEKC wrote: »

How do you qualify for stamp duty relief on buying land. Do you need to be under 35?

Yes under 35 with a green cert

morphy87

Hard Knocks wrote: »

Yes under 35 with a green cert

Is it under 35 or 35 and under? What is the stamp duty rate for a young trained farmer?

Gman1987

morphy87 wrote: »

Is it under 35 or 35 and under? What is the stamp duty rate for a young trained farmer?

"A transferee must be under 35 years of age on the date of execution of the deed of transfer of the land."

https://www.revenue.ie/en/tax-professionals/tdm/stamp-duty/stamp-duty-manual-replacement/part-07-exemptions-and-reliefs-from-stamp-duty/section-81aa-transfers-of-land-to-young-trained-farmers.pdf

morphy87

Gman1987 wrote: »

"A transferee must be under 35 years of age on the date of execution of the deed of transfer of the land."

https://www.revenue.ie/en/tax-professionals/tdm/stamp-duty/stamp-duty-manual-replacement/part-07-exemptions-and-reliefs-from-stamp-duty/section-81aa-transfers-of-land-to-young-trained-farmers.pdf

What is the rate for over 35?

Gman1987

morphy87 wrote: »

What is the rate for over 35?

I believe its 7.5% on land purchases at the minute, 1% on inheritance from family.

Donald Trump

Gman1987 wrote: »

I believe its 7.5% on land purchases at the minute, 1% on inheritance from family.

Yeah, 7.5% on land.


I haven't read or heard this being said anywhere but I wouldn't be surprised to see that bumped up again in the next budget.


If that happens, it might take a bit of the heat out of the market from non-farming investors (which we hear are pumping money into it). If you buy before it increases, well you don't have to pay it, but the land could go down in price because of it when it does come in. The importance of that might depend on your time horizon.


I'd actually like to see some conditions on tax free leases of farm land - that the person availing of it should have had to be actively farming at some point in the past or inherited from someone who was (in the case of say a spouse for example).

morphy87

Donald Trump wrote: »

Yeah, 7.5% on land.


I haven't read or heard this being said anywhere but I wouldn't be surprised to see that bumped up again in the next budget.


If that happens, it might take a bit of the heat out of the market from non-farming investors (which we hear are pumping money into it). If you buy before it increases, well you don't have to pay it, but the land could go down in price because of it when it does come in. The importance of that might depend on your time horizon.


I'd actually like to see some conditions on tax free leases of farm land - that the person availing of it should have had to be actively farming at some point in the past or inherited from someone who was (in the case of say a spouse for example).

I think the 7.5 percent is very steep for someone actively farming, I would have no problem with that rate been charged to someone that is a non farmer with other interests, still the 7.5 percent doesn’t seem to be effecting the price when it comes to farmers purchasing

Donald Trump

morphy87 wrote: »

I think the 7.5 percent is very steep for someone actively farming, I would have no problem with that rate been charged to someone that is a non farmer with other interests, still the 7.5 percent doesn’t seem to be effecting the price when it comes to farmers purchasing

There are two taxes in my post. Stamp duty and income tax relief rental income for 5+year leases.


Currently an investor can buy land, pay the 7.5% stamp duty and get their costs back in say 5 years. With interest rates currently on the floor, then they are looking at capital appreciation/depreciation during that timeframe. If you bump up stamp duty rates, it should limit the price that a buyer will pay.

The effect would be even a little more pronounced. Take the hypothetical scenario of a fella with 119k cash and another fella with 40k cash and 80k loan. Under scenario 1 of 0% stamp duty, then the land is bid to 120k. Second fella wins and has his ~67% LTV loan.

Under the second scenario of a 20% stamp duty, it still gets won by the second buyer, only this time at 100k + SD of 20k. This time his LTV is 80%. He needs it to appreciate 20% for him to "get his money back" if he wants to sell it again soon.....so it may not be as attractive for him to go so high now and maybe the cash bidder now gets it for 90k + SD.

Interest rates will also likely rise though. The US Fed announced a surprise bringing-forward of their planned rate rises to 2023 I think during the week. (If you look at a graph of EURUSD fx you will see a sudden drop during the week which indicates a surprise in the market .. followed by a decline in the following days.).

Europe may not necessarily follow but *if* they do see a similar jump in inflation then rates will rise. So you have two competing factors there - land being somewhat of a good hedge for inflation attracting investors, and also the fact that inflation may inflate away the real value of your debt, but on the other side, a rates rise to curb that inflation would make servicing that debt more expensive. And it also makes deposits more attractive. EU target 2% inflation. I don't think that the Germans would want it to run rampant unless they needed to inflate away the debt of the pandemic.

Personally, I'd be happy to see rates and stamp duty go up. If I was an investor, I wouldn't want to buy and then see SD go up although I might be happy for that if it was a long term purchase to actively farm and I had no intention that I would ever sell it. The other, important, downside though of land being cheaper is that maybe there will not be any sellers!


Anyway, I suppose my non-waffling point would be that the SD rate would not have 100% of an effect. Lads factor it into what they are willing to pay. If they are willing to go to 10k an acre with a 5% SD, they would adjust that down if SD was 15%. It causes a flow between the seller and the state.