Across Australia, Farmers & investors seeking stable, long term returns in volatile markets, are often looking at rural property real estate.
Rural (Farm) Property Loans work the same way as a typical mortgage over a property, where the lender provides funding secured by the rural property.
There are some key differences to that of a typical residential real estate mortgage:
- Rural Property loans have a lower lending value ratio, typically between 65% and 70% of the property value. The reason is that these properties take longer to sell and as a result are deemed a “higher risk” then your home or investment property.
- Due to this risk they can at times attract higher interest rates and associated regular fees.
- A loan application or approval fee is higher and can attract up to 0.75% of the lending amount.
- Assessment of the loan is based on a range of items – cashflow, business profit and loss statements, length of lease conditions (if applicable), and personal tax returns.
The benefits of taking out a Rural Property loan are:
- You can structure the debt to suit your tax structure – company or trust name, superannuation fund or personal name.
- Interest and Fees are normally tax deductible.
- You may be able to borrow in a Self Managed Super Fund.
- There are options to go interest only, fixed or variable rate, loan split or principle and interest.