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How to secure loan for land - non farmer

  • 01-08-2022 1:30pm
    #1
    Registered Users Posts: 312 ✭✭


    A parcel of land has come up for sale which borders my site (will likely go for ~200k). I don't farm.

    I've equity in my home which if I could remortgage would cover the loan but I've been told by a mortgage advisor that I can't remortgage the property and use the money for purchase of land.

    I spoke to BOI agri loans but they want a herd number, Max loan was 120k regardless.

    Repayment capacity is not a problem, the problem is finding someone who will lend the money.

    Any suggestions?



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Comments

  • Registered Users Posts: 4,301 ✭✭✭jackboy


    Your own bank is your best bet but you will need to tell them what you are going to do with the land and how that makes financial sense.



  • Registered Users Posts: 312 ✭✭flashforward


    My banks are Ulsterbank (current account) and KBC (mortgage) so not a great starting point.

    I don't farm so I'd likely lease the land.



  • Registered Users Posts: 5,055 ✭✭✭Grueller


    No deposit, no loan I'm afraid, unless you have other land to put up as security.



  • Registered Users Posts: 312 ✭✭flashforward


    I've a deposit of ~20%. But yeah it doesn't look like I've any options frustratingly.



  • Registered Users Posts: 2,407 ✭✭✭J.O. Farmer


    Have you also 7.5% for stamp duty and another couple 5-6k for legal fees. The bank won't lend to cover that.

    Really banks want to see repayment capacity and security.

    Maybe ask about a non agri commercial loan. They may want some kind of business plan though.

    Buying land to lease doesn't make sense short term-medium term though. Unless the plan is to sell again or you want to do something else with a portion there may be better investments.

    Edit: the land itself could be security if the loan to value is low enough. I think maybe round 70%



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  • Registered Users Posts: 312 ✭✭flashforward


    There's 300m of road frontage near the village so there's a definite possibility of sites for those who meet local needs. I don't think a business plan of selling off sites would work for a commercial loan or business plan though?

    Whatever I'd tell a bank the only sites off this parcel would be for my Children if they wanted them.

    Repayment capacity isnt a problem, if I had a stronger deposit situation I could borrow over twice what I need here.



  • Moderators, Society & Culture Moderators Posts: 2,915 Mod ✭✭✭✭K.G.


    If you can rise 30 % + of the property value it really smooth s the bumps and makes you very backable.equitity in your own home is nearly worthless for this proposal



  • Registered Users Posts: 8,593 ✭✭✭Mooooo


    They'll have no interest in house equity as they would find it difficult to get it if it went that way. As lads said above bigger deposit if you can swing it, and as much proof that your repayment capacity won't be under threat.



  • Registered Users Posts: 5,122 ✭✭✭roosterman71


    Road frontage means diddly squat anymore unless the land is zoned for residential or you're farming it and building on it. Ya'd need to check the local planning for your council and area in the county to see what's the story. I've land within a 50km zone on an R road and it can't be built on due to current planning laws in the county. Couldn't even build on it myself as it's access is onto an R road and I've other land on L roads. So be careful if ya think ya might get to build



  • Registered Users Posts: 312 ✭✭flashforward


    Thanks for the replys all.

    It's zoned 'Non-residential' but I wouldn't be purchasing it for the potential of building on it (Looking at 20+ years before a kid would even be in a position of needing to build regardless) . It's more that no one else will build on it and it would give me options to do something with it when I get older/kids have fled the nest.

    Pulling 30% can't be done unless I borrowed for it - surely I couldnt just go to the credit union, take out a 20k loan, add it to my 40 and a bank would be happier than borrowing the additional 20k directly from them?

    Again the frustrating thing here is the ability to repay without having a mechanism to borrow. I'm trying to arrange a sit down with BOI but people are on holidays.



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  • Registered Users Posts: 506 ✭✭✭asdfg87


    You could consider applying for forestry if only to obtain the loan. Likely not a runned but a thought.You cannot ask the seller to wait for license for trees but i just thought i say anyway...



  • Registered Users Posts: 2,759 ✭✭✭cute geoge


    Have you not anything you can sell to raise 20k like a car ,buy a banger for a few months to keep you going ,Sell other stuff to raise cash phones ,tv ,laptop ,your wives jewellery 😀



  • Registered Users Posts: 506 ✭✭✭asdfg87


    Ask an accountant, i seen a guy bought land some years and an accountant set-up the funding, the buyer had a business.



  • Registered Users Posts: 1,246 ✭✭✭Deub


    would you be happy to have only a portion of the land (The one next to your house)?

    The solution could be to offer the seller to buy only a portion at a higher price per acre or to agree the same with an adjacent farmer interested in the place as well.

    The chances are low but at least you would have tried.



  • Registered Users Posts: 17,905 ✭✭✭✭Bass Reeves


    There is no reason you cannot borrow the 20k from a CU. However if you do it may or may not hinder you getting the bank loan. The loan can be termed as a car or for any other matter. It may also be in your spouse or partners name.

    If you do not intend to use your spouse or partner as part of your loan application then it will not appear in your loan application. If you do intend for you spouse/partner to appear on the application then the loan may hinder you.

    You have stated that your repayment capacity is twice the loan amount. The bank may allow a 80-90% loan in a case where your repayment capacity is very strong.

    What I struggle to understand is if you repayment capacity is so strong how come your savings are so low.

    Were you overpaying you mortgage to the detriment of savings

    Slava Ukrainii



  • Registered Users Posts: 18,689 ✭✭✭✭Donald Trump



    The minute it is planted, its value will drop to forestry value and it will stay at that permanently.

    Going to the Bank with that plan would be like going to a finance company to buy a new car and telling them it'll be grand because that they'll have the car as collateral, but you're planning to race it in stock car races.



  • Registered Users Posts: 6,624 ✭✭✭amacca


    If you borrow for the deposit it will show up as a loan on a central credit register and the bank you are borrowing from will be aware of it afaik........catch 22 it could probably hurt your chances of borrowing the full amount......


    If you borrow from the CU etc it will show up as a transfer into to an account .....if you include that in your deposit.....its highly unlikely they won't ask you for the source of funds....its only my opinion but I cant see many banks looking too kindly on borrowing for a deposit in order to borrow more on the strength of that deposit and its unlikely they won't look for an explanation of where the funds suddenly came from.........the days of doing while not so far in the past are over I think


    Perhaps selling things (like car etc) to build up a deposit might work....... but it would be a pain in the tits to sell things you need not get to purchase the property and then have to go buying them again......



  • Registered Users Posts: 18,689 ✭✭✭✭Donald Trump


    As Bass said above, OP they would have to question why you have relatively low savings relative to your repayment capacity. Unless you have just finished paying off something else.

    You have 40k, but as J.O alluded to above, you really only have 20k because you'd need the other 20k for costs.



  • Moderators, Society & Culture Moderators Posts: 2,915 Mod ✭✭✭✭K.G.


    Are you really in a position to buy it so.is this is really a financial proposition it's the kind of thing you do if you have money lying around not with borrowed money



  • Registered Users Posts: 312 ✭✭flashforward


    Fair point re. savings. The house was finished last year (Direct Labour) and we've almost finished the landscaping this year. So everything for the last ~3years has been pumped back into it (primarily cash), hence the small mortgage relative to the value of it.

    The end of the spending on the house is all but here albeit 6 months too late by the looks of things.

    It certainly does not look like I am in a position to buy it K.G.



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  • Registered Users Posts: 18,689 ✭✭✭✭Donald Trump


    The question would then be that even if you could get equity release on your house, would you really want to put it at risk?



  • Registered Users Posts: 6,624 ✭✭✭amacca




  • Registered Users Posts: 17,905 ✭✭✭✭Bass Reeves


    He made the cardinal error of not borrowing more mortgage money. It's a deeply flawed thinking about borrowing more than you need to allow a bigger cash flow.

    In OP's case he could have kept a100k in cash without any risk to his house. Mortgage money is the cheapest money you will ever borrow.

    Capital give opportunity.

    Slava Ukrainii



  • Registered Users Posts: 18,689 ✭✭✭✭Donald Trump


    It is. But he might not have considered that he'd be buying anything up until the bit across the ditch came up unexpectedly.



  • Registered Users Posts: 17,905 ✭✭✭✭Bass Reeves


    It is something I always make the point about. Opportunity.

    People often look at money in the bank the wrong way. They look at it earning 0%. Then they look at a mortgage costing 2-2.5%. OP seems to be very lowly borrowed. 100k would have allowed him to buy it. I suspect that OP is at or below 50% equity to loan. 60k extra would probably have still kept him at or below 70%.

    It would be different if mortgage rates were 5-6% or more. But mortgage rates are 3-6% below personal lending rates.

    Slava Ukrainii



  • Registered Users Posts: 506 ✭✭✭asdfg87


    Why would you say land de-value as there is a big push towards planting? My information is planting is one of the easiest thing to get a loan for at the moment as banks are investing big-time in planting, the bank will keep the land as security. Of course each case separate.

    I know a guy who is currently in the process of obtaining a planting license, the land is to be sold when license granted as its nearly there. The auctioneer advised to get license and the value of the land would in crease in value by about 30% it the license is granted.



  • Registered Users Posts: 18,689 ✭✭✭✭Donald Trump


    Unless it is very bad land, planting will devalue it

    Here is 65 acres for sale at less than 4k an acre. It appears to be surrounded by good land.

    You are also not allowed to just revert planted land to agricultural land



  • Registered Users Posts: 18,770 ✭✭✭✭Del2005


    With interest rates so low on savings it would have been silly to borrow money, even at a tracker rates if you can get them, while having money lose value in a bank account.

    The OP wants to buy the land for possible houses for their children, which is highly unlikely to be allowed, or build something else. Once you put forestry on land that's all it can be for ever, they'll never be able to build anything on it. It depends on the quality of the land on it's value increasing or decreasing when planted, crap boggy land with loads of rushes will increase in value if planted vs well draining fields will loose value if planted.



  • Registered Users Posts: 1,407 ✭✭✭cjpm


    OP. Are there any natural subdivisions in the land? What acreage is it? And the various portions?



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  • Registered Users Posts: 506 ✭✭✭asdfg87


    They could build a log cabin without planning.

    Seriously i was thinking of an angle to borrow, i think if they were able to get the money there would not be forced to plant.

    Actually your right the bit of land being planted is marginal land. I am doing a small native plantation in the new year. Why would it decrease the value of the land? it will still be farmed with grazing sheep.



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