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If you own a farm or a small holding, then you might be able to apply for an equity release loan.
Whilst business properties aren’t typically allowed to apply for equity release, an increasing number of lenders are now open to accepting small holdings or small farms.
Whilst an increasing number of lenders are now open to releasing equity on farms or small holdings, this is still very much on a case-by-case basis.
Lenders will want to be assured that they will get their money back, so will look into a number of factors including how likely it is that the land could get flooded, how many animals you are and whether there are any restrictions to the land or sewage issues.
Your lender wants assurance that they will be able to sell the property or land once the owner passes away and the loan needs to be repaid.
Anything that would make the property harder to sell would put any lender off.
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A small holding is classified as a residential property that is surrounded by land. The land is privately owned and is typically used to grow food and house a small number of animals [1].
You might grow some fruit and vegetables, and keep sheep, chickens or even pigs. You might also keep bees or honey.
Your main focus will be sustainability and growing enough food for your family. Typically, a small holding is classified as anything below 50 acres [1].
Equity release lenders will accept standard houses, bungalows, flats or even maisonettes. If you own a small holding, then you are likely to own a large property on the land, which will certainly be eligible for equity release.
If your property or small holding is a leasehold, then you will still be able to apply for equity release as long as there are enough years left on your leasehold.
If there are only a few years left then you might be able to extend the leasehold alongside your equity release application [2].
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An annex is a self-contained apartment, away from the main property. If you live on a small holding or small farm, then it might be likely that you have a small annex on site.
If you do have an annex on site, then you might be able to release equity from this property without having to release equity from your main property.
If you live on a small holding, then you might have a listed building on the land. Some listed buildings might be eligible for equity release, whereas some others might not.
Whether or not your listed property is eligible for equity release depends largely on what grade of listing it is. The more specific or rare the listing is, then the less likely it is that you will be able to release equity.
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When it comes to releasing equity from a small holding, the accepted maximum or minimum value varies between lenders.
As a typical rule, the minimum amount that is accepted is approximately £70,000. Some lenders limit this minimum amount to £100,000, although this depends on your situation and the lender itself.
In terms of a maximum accepted amount, some lenders say approximately £600,000, whereas some others say around £6 million.
There are a number of factors why someone might reject your application to release equity on a small holding or farm. For example, you must have under a certain amount of acres and the amount of acres acceptable can differ between lenders.
Likewise, if your small holding suffers from any sewage, drainage or flooding issues then you might be rejected for an equity release loan.
When you first apply for an equity release loan, you will be expected to have a valuation carried out. This valuation will estimate how much your home is worth, taking into consideration any of these issues.
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An agricultural tie is also sometimes known as an agricultural occupancy condition. This is a type of planning restriction attached to a property by the local authority, where planning permission is granted for the property [3].
There will be a number of permissions in place, which will usually restrict the occupancy of the property to those who work for a farm or in agriculture [3].
If your property has an agricultural tie, then the saleability and marketability of your property might be affected, meaning that only a few lenders might be willing to lend to you as they will be less confident that they’ll get their money back once you pass away and the small holding or farm is sold.
For equity release specifically, you will need to remove the agricultural tie before you take out equity release.
There are now an increasing number of lenders who will consider you for equity release if you own a small holding or small farm.
For example, Aviva will consider your small holding for an equity release loan if you only have a small amount of business taking place. This could include selling your produce as well as using the property as a bed and breakfast.
Likewise, Canada Life will consider you for an equity release loan, but they will not accept your application if your small holding is involved in commercial farming or any other agricultural ties that earns you a living.
Pure Retirement will not offer you an equity release loan if you are registered as a small holding or if your property has any agricultural ties.
Likewise, Just will not consider your small holding for equity release and they will not accept any other properties that have any commercial ties to them, including a bed and breakfast, holiday lets or kennels.
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If you own a small holding or farm and want to be considered for equity release then the first thing that you should do is speak to an equity release adviser who has experience with this type of equity release.
Your equity release adviser will be able to see if you are eligible and talk you through the application process if you are.
You will also need to appoint a specialised equity release solicitor, preferably one who has experience with equity release loans.
If you want advice and support applying for equity release, then speak to a member of the team at Equity Release Warehouse.
We will talk you through the ins and outs of how the equity release process works as well as highlighting the pros and cons.
We will even use our very own equity release calculator to calculate how much equity you might be able to release from your home.
For more information and support, speak to a member of our team by calling us 0330 058 1579 or by visiting our website by searching www.equityreleasewarehouse.com.
[1] https://highground-uk.org/wp-content/uploads/2022/02/Smallholding-Land-Based-sector-guide.pdf
[3] https://www.countrylife.co.uk/property/buying-property-with-an-agricultural-tie-23428
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