OT - Agricultural Land refinance question...

Chip812 · Jul 20, 2012

I have a friend that is trying to get their agricultural land (yes, they use a tractor on it) refinanced and is having trouble finding a financial institution that will do it (at a reasonable interest rate - they found one that would do it but the institution added 4 percentage points to the 'going' rate)... Anybody know of some place that does refinance of agricultural land? Thanks.
P.S. Alabama, if that makes any difference...

Mike (WA) · Jul 20, 2012

Obvious first response is Alabama Farm Credit- part of the Farm Credit System, nationwide network of ag lenders.

David G · Jul 20, 2012

I had that problem on my home place, 40 acres with a house,
local bank ended up taking the paper. The big guys did not
know how to handle it without subdividing.

paul · Jul 20, 2012

What makes a difference is if it is real farm, or a hobby farm they 'use a tractor on'.

Real farms producing corn, soy, or wheat are sound investments (for now until the bubble busrsts) and you can find the typical ag lenders willing to cut a pretty good deal if you have good financial statements and a good portion of your own invested in it.

What is hard to finance is a 10-20 acre hobby farm that doesn't fit the 'farm' model, and appears to be a bix expensive house on a manor description. The ag banks aren't so interested in those, and the regular housing banks can't make those fit their 'generic housing' models so they are terrified of those properties.

I suspect if they are having trouble, they fit into that classification.

If thy have some actual farm fields that grow real crops, they need to emphisise that to the ag lenders - credit unions, FSA loan, Farm Credit Service, etc.

--->PAul

Bob Bancroft · Jul 20, 2012

I have a prin. balance of $15,000 on a farm mort. w/Farm Credit. Assuming I make it to Jan. 2013, it will be paid off. The rate (floating) as of the last statement(May 14) was 4.5%.
I know they(at least used to) offer better rates to larger borrowers.
And possibly a loan originated today would be cheaper.

Hotflashjr · Jul 20, 2012

FSA does not refinance existing mortgages under their direct program which has the low rate. Right now it is 3.375% for up to a 40 year term. Too bad it isn't a new purchase because you can't beat that. I would try a Farm Credit. I think their variable rate right now is 4%-4.25%. The Farm Credit near us has a rural housing program thats for hobby farms. Not sure what those rates are.

JDseller · Jul 20, 2012

I would say you only have half the story. They either have something on their credit or are a farmette rather than a "real" farm. The lending rules that banks have to go by are very different for those two different types of loans. Anything with over five acres of land with a home is harder to finance than a simple home and lot. Sometimes it is also a percentage of the total loan that the land has to be less than to have a simple home loan. The simple home type loans have the cheapest rates right now as those loans are usually resold to Freddy Mac or Fanny Mae. The loans they have to keep "in house" cost more as they have to keep the loan longer to earn as much money on it.

Right now my local bank is loaning Ag land money at 4.25% for a twenty year fixed, with a good credit history and only up to $4000 per acre or 70% of value whichever is less.
They are not going to be the ones left holding the bag on the $10-12K land.

The Red · Jul 20, 2012

My 20 year old farm neighbor is working with the local bank on his first 179 acre farm purchase. There is some special either FSA or Farm Credit that he can get a 30 year mortgage at 1.9%. I only briefly spoke to him yesterday so I don't know the program or the details.

bg/mo · Jul 20, 2012

does it have a house on it? is he living there? this make a difference too

JDseller · Jul 20, 2012

It is a first time farm purchase program for younger farmers to be able to buy land. There are several different types of this program. Some are federal and some states have there own. The Federal one is through the FSA office. The state ones are actually through your local bank. The work with the state directly to utilize the program.

There are similar programs for first time home buyers too. So this is not just a farm program issue.

The Red · Jul 20, 2012

I know he is using the local bank. Indiana must have some program. I have financial software so I have been providing him with some repayment annual principal/interest schedules depending on the size of the mortgage.

OliverGuy · Jul 20, 2012

Farm Credit Services was the best for me, just moved it everything ag to them. They were the easiest to deal with and gave me a better rate than the bank I have been using for 20 years. Some banks aren't into ag.

Indiana Ken · Jul 20, 2012

I use the local credit union for the farm morgage. I have not been inside a bank for 30+ years.

OT - Agricultural Land refinance question...

Chip812

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Mike (WA)

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David G

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paul

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Bob Bancroft

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Hotflashjr

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JDseller

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The Red

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bg/mo

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JDseller

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The Red

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OliverGuy

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Indiana Ken

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