Rural or hobby farm home loans

Looking to start a new chapter living life on the land? A rural home loan can help you get there.

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Dreaming about clean air, peaceful mornings and night skies blanketed in stars? If the COVID-19 pandemic has taught us anything, it's that it's possible for many of us to work from almost anywhere. So if a tree change is on the horizon, and you want to raise your kids away from the city or enjoy your retirement in tranquillity, you may want to learn more about specialised rural home loans.

How do rural home loans work?

A loan for a rural property can be used for both business and personal purposes. Often described as a hobby farm, these types of properties can be a little more difficult to gain loan approval for.

This is because rural properties are generally considered higher risk than more suburban homes. Banks and lenders are always looking at the worst-case scenario, which is you not paying your mortgage. If you stop repaying your loan and they have to repossess your property and sell it, there are likely to be fewer buyers in the market for a rural home. As a result, it could take longer for the property to sell, or they might have to sell it for a steep discount.

However, if you own a city-based property, lenders take into account that it may be far easier (and quicker) to sell the property and settle your debt.

Therefore, many lenders are unwilling to lend money for rural properties.

There are some lenders who will give you a loan, so don't despair. If you are looking at a hobby farm or a residential rural property and you don’t plan to turn your new property into your primary source of income, a rural home loan might be just right.

Hobby farm versus commercial farm

When we are talking about rural property, it's important to make the distinction between a hobby farm and a commercial farm.

Hobby farms are:

  • Primarily residential properties.
  • Not used for commercial income purposes or as a speculative investment.
  • Sometimes used to raise livestock or to grow crops, but only for the purposes of recreation or lifestyle (for the enjoyment of the owners only), not for commercial gain.
  • Valued only on the weight of the land and any buildings on it.

Commercial farms are:

  • Considered first and foremost to be an income-producing asset.
  • Used to produce a commercial income.
  • Valued based on the total assets at the property, including machinery, livestock, crops and otherwise rural income-producing assets that can be included in the valuation.

How much deposit do I need for a rural property?

Windmill on an Australian farm.The deposit you'll need for a rural property will depend on the size of the property.

Lenders may allow you to borrow with a deposit as small as 5-10%, or as much as 30%, depending on the size and location of the property.

Your application is more likely to succeed if your property is under 10 hectares. Banks are more hesitant about lending on larger properties, and above 200ha banks are likely to be very conservative in their lending.

That being said, rural home loans are designed for these purposes exactly, so before you get discouraged, do some research about which lenders offer the best loans for your needs.

Rural loan eligibility: Land size

Lenders can be hesitant when it comes to the size of the land you're purchasing. This is because larger lots are often used for commercial farming purposes, which requires a commercial home loan.

The size of the land you buy will often dictate the size of the deposit you need. With land below 10 hectares, your loan is likely to be treated like any other residential home loan, and you may be able to borrow up to 95% of the value of the property you're purchasing.

Some lenders may require only a 5% deposit for land up to 50 hectares. However, if you're buying land larger than this, you're likely to need a 20–30% deposit.

Properties above 100 hectares in size are unlikely to find residential home loan financing. Lenders often consider these properties to be commercial farms, even if you don't intend to produce income from farming.

What else do lenders look at when you apply for a rural home loan?

Each lender will have its own set of criteria it uses to assess whether it will offer a home loan for the purpose of purchasing a rural property. Aside from land size and how you will use the land, many lenders consider:

  • Location. Some lenders have postcode restrictions in place for rural home loans. This means if the property you are looking at purchasing is outside of the lender's approved postcodes, you may need to reconsider the property or look at another lender.
  • Property Access. The property must be easily accessible for different reasons. A dirt road is appropriate and often common with rural properties, but it must be well maintained so that any vehicle that needs to can access the property.
  • Public Services. The property must have access to public services such as electricity, water and sewage, if you opt to have your property completely self-sustaining it may also be useful to have all the regular services accessible at the property just to make the process of lending easier.
  • Area Zoning. In order to be classified as a hobby farm rather than a commercial farm the land will need to be zoned as rural, rural residential or the equivalent depending on which state it is in. If it is zoned as industrial, commercial or for farm use this may impede your ability to get a rural home loan as it may be a commercial farm.

Specialist rural and agricultural lenders

Here are some companies in Australia that may be able to help you with specialist finance for different types of acreage and rural property purchases:

  • Aglend. Aglend offers finance solutions for farmers and agricultural businesses. This includes rural land loans.
  • Australian Lending Centre. This specialist lender can help with rural loans.
  • Redilend. This bad credit lender also works with rural properties and hobby farms.
  • Building Loans Australia. This brokerage is focused on land purchases.

How to apply for a rural home loan

If you have made the decision to take out a rural home loan to buy a home outside of the city, start by doing your research to find the best conditions, terms and borrowing rates.

It’s advisable to speak with a mortgage broker who understands your needs and can help steer you in the right direction.

First and foremost, plan for the future and research your possibilities. If you are set on a tree change and can feasibly afford to make the move, put the extra time into finding the rural home loan that’s right for you.

Compare land home loans

This table displays information about land loans from various lenders. Some of these loans may not be available to purchase a hobby farm or acreage or larger piece of land. If the green button beside a product is labelled "Enquire more" it means you will be taken to a page where you can connect with a mortgage broker to help you find a suitable loan.

$
years
Name Product Interest Rate (p.a.) Comp. Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
UBank UHomeLoan Variable Rate
2.34%
2.34% p.a.
$0
$0 p.a.
80%
$581.39
Available for rural residential properties up to 25 acres. Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
Greater Bank Great Rate Home Loan
2.59%
2.60% p.a.
$0
$0 p.a.
80%
$600.83
Fund the construction of your new family home with a very competitive variable interest rate.
AMP Bank Land Loan
4.88%
4.93% p.a.
$0
$0 p.a.
90%
$795.24
Purchase land to build on or hold as an investment and pay no monthly fees.
UBank UHomeLoan Variable Rate
2.74%
2.74% p.a.
$0
$0 p.a.
80%
$612.67
Available for rural residential properties up to 25 acres. Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
ANZ Land Loan
4.39%
4.49% p.a.
$600
$5 monthly ($60 p.a.)
90%
$751.26
Buy vacant land with a competitive interest rate. 5% deposit option available.
AMP Bank Land Loan
5.6%
5.22% p.a.
$0
$0 p.a.
80%
$862.04
Interest only loan for borrowers building a home on vacant land.
ANZ Land Loan
4.99%
5.09% p.a.
$600
$5 monthly ($60 p.a.)
90%
$805.29
No ongoing fee for this loan with a 100% offset account and a redraw facility.
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16 Responses

    Default Gravatar
    GregSeptember 27, 2019

    I’m interested in getting a loan of about 55k for a property on a crown perpetual lease. I’m mainly interested in this place as a family weekender.
    What are the loan types available and what sort of deposit will I be looking at?
    Thanks.

      Default Gravatar
      NikkiSeptember 28, 2019

      Hi Greg,

      Thanks for getting in touch! The information above shows the type of loan you can get to lease a property and you can choose from the lenders listed above. Your deposit depends on the loan you apply for, for example, some allow a 10% deposit, and some will need a 20% deposit.

      To explore more options, I’d recommend that you get in touch with a mortgage broker. They’re home loan experts who can help you find the right loan for your situation and can explain any processes, fees, or charges that may apply.

      Hope this helps!

      Best,
      Nikki

    Default Gravatar
    KathleenJanuary 8, 2017

    We are wanting to buy a house on acreage out of a major town, approximately 30 minutes away, the property is 45 acres and is mainly Forrest, it has a self sustained house built on it, septic, solar and water tanks. It will only be residential and not farmed for money, is this classified as rural.

      Avatarfinder Customer Care
      MayJanuary 9, 2017Staff

      Hi Kathleen,

      Thank you for your question and for contacting Finder!

      Basically, lenders have postcode restrictions in place for rural home loans, so if the property you are looking at purchasing is outside of the lender’s approved postcodes, you may need to reconsider the property or look at another lender. It’s best to check with the lender (you want to apply for the rural home loan with) if the property you’ve chosen is under their approved postcodes.

      Alternatively, you may also speak with a mortgage broker who will take all your circumstances into account and offer you a range of lending options.

      Cheers,
      May

    Default Gravatar
    MaryJanuary 22, 2016

    Can you tell me if it is possible to reverse mortgage a property which is more than 150 acres? Mine is twice that and I have not been able to find anyone who will?

      Default Gravatar
      BelindaFebruary 2, 2016

      Hi Mary,

      Thanks for reaching out.

      Your ability to qualify for a reverse mortgage for a rural property will depend on a range of factors including the property value, property location and your proximity to retirement age. As a result, applications for a reverse mortgage for a large rural property are treated on a case-by-case basis and are subject to the lender’s individual circumstances.

      You can compare reverse mortgages and learn more about how they work on this page but you should speak to a licensed mortgage broker to discuss your options as they can draw upon their panel of lenders to find one that’s more likely to review your reverse mortgage application. A broker may have relationships with specialist lenders who may have more lenient lending criteria.

      All the best,
      Belinda

    Default Gravatar
    SantiagoMarch 23, 2015

    Hi, my name is Santiago, originally from Argentina and hold an Australian passport. I want to invest in a rural property in Spain and start a boutique hotel. Both my partner and myself are employed here in Australia and we own several properties in Argentina/USA – my question is can I borrow money from an Australian bank to invest in a rural property overseas?

      Avatarfinder Customer Care
      ShirleyMarch 23, 2015Staff

      Hi Santiago,

      Thanks for your question.

      Generally, you can but the land will need to meet the criteria set out by the lender.

      If you find that none of these loans are suitable for your situation, there is always the option of speaking to a home loan broker. They will be able to help you further in narrowing down a suitable home loan option.

      Cheers,
      Shirley

    Default Gravatar
    DEBFebruary 19, 2015

    We have a 2200 acre property (non hobby farmers) this rural loan is through one of the major lenders and our house in town (which we own)is mortgaged to this Loan. We are wanting to build/ or move a house on our property but our bank will only lend us so much. Who is the best bank to talk to about obtaining a loan for our house.

      Avatarfinder Customer Care
      ShirleyFebruary 19, 2015Staff

      Hi Deb,

      Thanks for your question.

      You may want to use our borrowing power calculator to see where you stand in terms of how much you can borrow. You can also see a list of specialist rural and agricultural lenders that will be able to assist you.

      I also recommend getting in touch with a licensed mortgage broker. A broker can help you understand your financial position and they can leverage their panel of networks to find a lender that is more inclined to review your application.

      Cheers,
      Shirley

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