Finance for Change of Agricultural Use - Holiday Homes

If you’re considering diversifying your farm, one solution can be provided by redundant or unused buildings. Turning these structures into holiday homes – or even constructing completely new buildings – can provide a lucrative new income stream.

Since the announcement of Brexit, the number of British holidaymakers who are staying in the UK rather than travel abroad has increased. Catering for this demand can provide a dependable income, with £1000 per week fees common in peak season.  

Of course, there will be challenges. If you’re a tenant farmer, you need permission from the landowner. You also need to have planning permission to convert any farmhouse buildings for non-agricultural activities. Planning permission may be required whenever there’s any change of use, whether or not you’re making any structural changes to the building.

You will need to provide modern standards of accommodation, with heating and plumbing, electricity and wifi internet access. The initial cost depends on the current state of the building and, like any business, various health and safety measurements must be met before accommodation can be offered to the public. Even if you have a suitable building, considerable investment will be required to provide holiday homes to modern standards.

At Rangewell, we can help you ensure you can raise the necessary funds.

Your funding options

We can provide a number of solutions for the conversion of agricultural buildings, and for the construction of new holiday homes. These include:

• Agricultural mortgages
• Commercial mortgages
• Commercial remortgages
• Secured and unsecured loans

Agricultural mortgages - finance for land and buildings

An Agricultural Mortgage is a versatile loan product designed to help farmers buy or improve farm properties. They are a specialised loan product, with the loan secured by the land itself. They can be used to finance the purchasing of a farm, or of a farm building. They can also be used to fund improvements or extensions to existing farm properties.

You can borrow up to 80% of the value of your existing farm buildings or land. You can choose repayment terms between five and thirty years and interest rates that can be fixed or variable. Repayments can be arranged to fit your business cashflow, either monthly, quarterly or annually. If your business plans change, you can extend the term of your loan, subject to approval.

There will be valuation, arrangement and legal fees to consider. There can also be additional costs for the services of professional advisors – but if you have a commercially sound proposition you may be able to use an agricultural mortgage as finance for holiday lets.

Contact us to find out more about Agricultural Mortgages.

Converting agricultural property with a Commercial Mortgage

A Commercial Mortgage is often used for buying business premises – but it is possible to set up a Commercial Mortgage for agricultural buildings. These operate much like a residential mortgage, with a large loan secured on the property itself.

Generally, Commercial Mortgages are for 15 years or more, and, as with a residential mortgage, the premises will be at risk if you are unable to keep up your repayments.

Unlike a residential mortgage, the rates for a Commercial Mortgage are arranged on an individual basis. Lenders will look at your business, your accounts and projections to ensure that it has a future and set interest rates based on the level of risk they believe it presents.

Because of the legal and administrative costs, it is uneconomic to borrow less than £50,000 with a commercial mortgage, and some lenders have a minimum of £75,000 or more, but there is no set upper limit.

Find out more about Commercial Mortgages.

Alternative lending options

If you need more flexibility about how much you pay back and when, we can provide a wide range of running options, include loans form alternative lenders with a flexible approach to you your funding needs.

Secured and Unsecured Loans

Borrowing can be a simple way to raise smaller sums to convert buildings, and business loans may be Secured or Unsecured.

Unsecured Loans are like personal loans, but based on the creditworthiness of your business. They can be simple to arrange as they don’t involve holding any assets as security. Loans are repaid in monthly or quarterly instalments over an agreed term, usually under 5 years. Modern online lenders can provide fast unsecured lending, but you will need to provide a personal guarantee, which means you will be personally liable for the loan if your business is not able to repay it.

You usually can’t borrow more than one month’s turnover without security, and most Unsecured loan providers will not lend more than £250,000. However, many business lenders might be prepared to offer larger sums with a Secured loan.

Secured Loans are ‘secured’ because the lender will require security in case you cannot pay the loan back. This could be your home, or your business premises, or your land.

You can have longer to repay, and enjoy lower interest rates. This means that monthly repayments can be lower and easier to fit in with your cashflow, and it may be possible to borrow very large sums of money if you can provide suitable security.

Find out more about business lending.

How we help you capitalise your holiday home business

At Rangewell we work across the entire lending industry, and we have finance experts with personal experience in the agricultural sector and with property development. That means we can provide a unique service when you want to diversify into the holiday home sector. We can help with funding for holiday lets and any other type of finance to diversify your farming business.

We will help you to find the most appropriate funding from lenders across the market – from established high street banks to alternative funding suppliers. Our specialist teams, experienced staff and land agents can give you all the help you need to develop a proposal and choose the right funding to bring your holiday home plans to life.