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Stormcrow

Joined: 17 May 2006
Posts: 33
Location: Lincolnshire

Posted: Wed May 17, 06 10:09 pm Post subject: Finance

I have recently been trying to find a small plot of land to try and tentatively start along the self sufficiency road. This is proving to be very difficult, as getting the finance to purchase land is proving to be a bit of a nightmare. I suppose that everyone in the world (apart from me) knew that you couldn't get a mortgage on land. My bank won't even give me a personal loan for this purpose.

I am told that the only way that I can do it is to release some of the equity in my house, but I would prefer not to do this if at all possible. This is mainly due to the fact that we have diliberately paid more each month than we need to to reduce the term of our mortgage over the last few years to avoid paying more interest than is absolutely necessary.

Does anyone have any ideas where I can raise some finance?

jema
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 28235
Location: escaped from Swindon

Posted: Wed May 17, 06 10:24 pm Post subject:
Knowing the rough amount would help.

dougal

Joined: 15 Jan 2005
Posts: 7184
Location: South Kent

Posted: Wed May 17, 06 11:25 pm Post subject: Re: Finance

pcrampton wrote:

... getting the finance to purchase land is proving to be a bit of a nightmare. I suppose that everyone in the world (apart from me) knew that you couldn't get a mortgage on land. My bank won't even give me a personal loan for this purpose. ...

News to me ...
https://www.mortgages.co.uk/commercial-mortgages/Mortgages-for-Commercial-Properties-argricultural.html
https://www.natwest.com/business02.asp?id=BUSINESS/BORROW/MORTGAGES/AGRICULTURAL
https://www.mortgagesforbusiness.co.uk/commercialinvestment/agricultural.asp
https://www.diversefinance.co.uk/commercial_mortgages/raising_a_100_commercial_mort/
and I'm sure there must be hundreds more...
I think you must have been talking to the wrong people

As long as the asset has a realisable value (ie the asset is good security for the loan), people will lend against it. But expect to have to put down a significant deposit, and pay a higher rate than for a "home loan" - its a different market.

Welcome to the site, I hope that you'll join in lots of our discussions, and I wish you good luck in finding a satisfactory finance deal.

PS Because Agricultural Land and Woodlands get special inheritance tax treatment, its not unusual to have inexperienced non-professional farmers wanting to buy some... so talk to IHT specialists as well, but don't bother trying to get what the industry would regard as a 'commercial' loan from "home loans" people.

PPS If you are wanting to 'just' borrow an extra, say �25k, you *will* almost certainly find it *much* cheaper to borrow that against your house as security (by increasing the mortgage amount) rather than by taking out a totally separate loan secured against the land. And it would provide an opportunity to review the deals available from different mortgage providers. If you are routinely overpaying, you might be better with an Offset, for example. (Not least because you can withdraw your overpayments with no fuss, should you need capital for another project.)
Thats because "home" loans are a much more competitive (and retail) market.
And compared to the ("small") amount of the loan, there would be relatively large setup costs for a second loan secured against the land.
So upping the house mortgage could be the simplest, most accessible and most financially sensible route.
Another advantage would be that the loan wouldn't have to wait for the lender to value the land you were interested in - so you'd be free to, for example, buy at auction without worrying about the finance.

It could well be worthwhile paying for a session with an Independent Financial Advisor. (Often better to pay for utterly impartial advice, rather than have them trying to sell financial products on commission...)

Treacodactyl
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 25795
Location: Jumping on the bandwagon of opportunism

Posted: Thu May 18, 06 7:50 am Post subject:

Out of interest how much land are you after and where have you looked? If you know an area well have you thought of asking local land owners rather than waiting for something to come up for sale? Even approaching people who have recently bought some land as they may be willing to sell off an unwanted section to cover some of their original costs. Have you thought about renting or buying somewhere with other like minded people?

As far as borrowing money I agree with Dougal. Borrowing against your home will be cheaper as the rate will be lower. Even if you get a loan as the rate will be higher on that it would make sense to pay that off first and not pay the mortgage. Of course you need to be certain you can handle the payments.

If you still want a unsecured loan have you thought about places like the AA or Direct Line etc? They often have competitive rates and when I last looked didn't care much what the money was used for.

Welcome to our site by the way.

Behemoth

Joined: 01 Dec 2004
Posts: 19023
Location: Leeds

Posted: Thu May 18, 06 7:53 am Post subject:
I agree with the above - provided you've got a good deal on your mortgage you wont be able to borrow money cheaper unless you get a student loan.

Stormcrow

Joined: 17 May 2006
Posts: 33
Location: Lincolnshire

Posted: Thu May 18, 06 5:44 pm Post subject:

Thank you for your responses. I seems that I will have to look a little bit further. I found a company who would provide a loan if I were a business, but I am not, and haven't really thought of being one. Would this be a good idea? I thought that for the first few years I would just be finding my feet and trying things out. So I thought setting it up as a business would have been a mistake. Maybe I should re-think. Another problem is that the only buildings on the land are five stables. Part of the planning permission for these stables stipulates that they can not be used for commercial purposes. Queers the pitch a bit. The land itself is approx 2.5 acres and the asking price is �28k.

Thank you again for your responses.

Nick

Joined: 02 Nov 2004
Posts: 34535
Location: Hereford

Posted: Fri May 19, 06 7:59 am Post subject:

If you call yourself a business to borrow money, I'd imagine you'd need a business plan, and a business account, and you'll pay business banking fees, and all sorts. You will, however, be able to register for claiming VAT back, which may be attractive, even if you're not a real business, and don't manage to sell anything. You;d be able to claim back a proportion of servicing on your car, your equipment, your dog and cat food (you're organic, right, and need to keep rats and foxes away?), and pretty much anything else you need for the small holding.

However, what struck me, and I agree it will depend quite where you are, but 28k is a lot for 2 acres. Or am I totally out of touch? (We just bought 5 for 21k, and another 3 acre plot went for a shade under �16k). Admittedly, there were no buildings, but the remaining �13k would build a handsome block.

wellington womble

Joined: 08 Nov 2004
Posts: 15051
Location: East Midlands

Posted: Fri May 19, 06 9:08 am Post subject:
28K does seem rather a lot for 2 acres (mind you - what do I know about it!?) And if you think of overpaying your mortgage as an effcient way of saving money, then you can think of using the cash as the best way of borrowing (from your own savings) for an investment. Is there VAT on land?

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