7 min read
Land is usually a farming business's most valuable asset, and buying, expanding or restructuring around it calls for finance designed with agricultural cycles and long time horizons in mind.
What it is
An agricultural mortgage is a long-term loan secured by a legal charge over farmland or farm property, repaid over a period that can extend to 15, 20 or more years, reflecting both the size of the investment and the long working life of agricultural land.
It can be used for outright land purchase, buying out a family member or business partner, funding new buildings, or supporting a diversification project alongside the core farming enterprise.
Who it suits
- Farming businesses purchasing additional land to expand the holding
- Families managing succession, including buying out a sibling's or parent's share
- Farms funding new grain stores, livestock housing or other substantial buildings
- Businesses financing a diversification project such as holiday lets, renewable energy installations or storage units, secured against existing land
How it works
The property or land is valued, typically by an independent surveyor, and a loan is agreed against a proportion of that value. Interest can be fixed or variable, and repayment can be structured on a capital and interest basis or, in some cases, interest-only for a period.
- Valuation of the land or property to be charged as security
- Loan agreed as a proportion of that value, with the balance typically funded by the business
- Term structured over a long horizon, reflecting the nature of the asset
- Repayments can sometimes be profiled around farming income patterns
Typical terms
| Term | Typical range |
|---|---|
| Term length | 10 to 25 years, depending on the purpose and the business |
| Deposit | Typically a proportion of the purchase price, varying by circumstances |
| Payment frequency | Monthly, quarterly or seasonal |
| End of agreement | Loan fully repaid; charge over the land released |
| Security | Legal charge over the farmland or property |
Pros and trade-offs
Where it works well
- Long terms keep repayments manageable relative to the size of the investment
- Can support both core farming expansion and diversification projects
- Repayments can often be profiled around seasonal income
- Useful tool in succession planning between family members
Trade-offs to weigh
- Legal charge is placed over land, which needs careful consideration
- Valuation and legal costs are usually payable as part of the process
- Land values can fluctuate, affecting future borrowing capacity
Worked example
Worked example: purchase of an additional 40 acres
- Purchase price
- £520,000
- Loan amount
- £364,000 (70% loan to value)
- Term
- 20 years
- Indicative annual repayment
- Approximately £24,500, on a seasonal profile
- Security
- Legal charge over the newly purchased and existing land
These figures are illustrative only, based on an assumed rate and valuation, and are not a quotation. Land purchase should always be discussed with your solicitor and accountant.
If you are considering a land purchase or a farm restructuring, we can talk through how finance might be structured alongside your wider plans.
Next step
Talk through the numbers with us
Send us the details of the asset and we will come back with an indicative figure and a properly structured option from the funder panel. No obligation, and no pressure to proceed.