Equestrian & Agricultural Loans

Buyers of equestrian properties can benefit from tax incentives, historically stable appreciation, and the ability to generate farm income from activities like horse boarding, riding lessons, and crop harvesting. But whether you are a seasoned real estate pro or a first-time buyer, there is a lot to learn and much to consider when investing in horse property.

Equestrian properties can range from small parcels of land to world-class equestrian centers that generate millions in revenue. As with any real estate endeavor, choosing the right professionals to assist you is paramount to the success of your investment.

Realtors who specialize in selling equestrian properties can be a great resource. These agents are well-versed in local zoning, land use, environmental considerations, water rights, urban development, and the valuation of acreage and agricultural improvements like barns and riding arenas. They are often highly involved in their local equine communities, making them excellent resources for market insights and referrals to the best inspectors, contractors, insurance agents, and lenders for equestrian properties. 

Before applying for a loan, it is helpful to have a picture of the lending landscape for equestrian properties. Mortgages are available through banks, credit unions, mortgage banks, and brokers. Finding the right lender and loan requires an analysis of borrower qualifications, property location, and property characteristics. The better your qualifications are (credit, income, available assets), and the more standard or common the property is (single-family residences, townhomes, condos), the more lending options there are.

Equestrian properties are agricultural, meaning their zoning allows for agricultural use of the property. Many equestrian properties also have homes on them, and if the owner occupies or plans to occupy the property, a residential mortgage loan may be the right fit.

Residential Mortgage Loans:

Conventional Conforming Mortgages meet Fannie Mae or Freddie Mac standards. These Government Sponsored Entities allow lenders to finance properties with agricultural zoning, if the zoning is typical for the area, the property is residential, residential use is permitted, and the zoning has no adverse impact on property value or marketability.

Government Backed Mortgage Loans are guaranteed or insured by the Federal Housing Administration (FHA), the U.S. Department of Veteran Affairs (VA), and the U.S. Department of Agriculture (USDA). Similarly, these Federal Agencies do allow residential properties to have agricultural zoning.

Equestrian properties with agricultural improvements (outbuildings, stables, riding arenas, etc.), agricultural use (horse boarding, hay farming, public events, etc.), and properties used to generate income may not be a good fit for these Conventional Conforming or Government Backed Mortgage Loans. Luckily there are alternative loan options for the property, borrowers, and loan sizes that do not fit these traditional loan boxes. 

Hobby Farm Loans are residential mortgages for borrowers whose primary income is not from farming activities and for properties well suited for personal (hobby) farm use, as opposed to commercial endeavors. Hobby Farm Loans may be available through select banks, credit unions, mortgage banks, and brokers.

Properties with equestrian improvements or agricultural use beyond the scope of a hobby may be eligible for portfolio loans.

Portfolio Loans are mortgages made and held by a private institution or investor. The qualifications, terms, and pricing for portfolio loans vary, because each portfolio lender establishes the criteria for the loans they make and hold in their loan portfolios. Not all lenders offer portfolio financing, and even fewer finance agricultural properties. Asking for lender recommendations from realtors, researching lenders online, and contacting several lenders are good practices when shopping for a portfolio loan.

Equestrian properties, with little or no residential value compared to the value of the agricultural improvements or total land value, are a better fit for commercial agriculture loans.

Commercial Agricultural Loans:

Agricultural Loans (Ag Loans) are mortgages used to purchase farms, ranches, orchards, vineyards, wineries, nurseries, equestrian properties, and land. The value of the land, the property improvements, and the borrower's desired loan size will determine the specific loan options that are most appropriate.

Loan terms available for agricultural land include fixed-rate, variable-rate, adjustable rate, and lines of credit. Flexible repayment options include monthly, semi-annual, and annual loan payment schedules.

An experienced agricultural lender will help you evaluate your qualifications for financing and address property considerations as they relate to your financing options.

Author Bio:

David Blackmon is a Senior Loan Officer and Branch Manager for Lumen Mortgage. His contribution comes to us courtesy of LumenMortgage.com.

Equestrian Property with Indoor Riding Arena