Loan type Land & Rural Loans

Vacant land, englobo and rural: what's the difference?

Vacant land finance usually covers a titled lot, zoned and serviced or close to it, ready for a building. It's the simplest land to value and lend against.

Englobo land is a larger parcel held as a whole, before it has been subdivided. The word comes from the Latin in globo: as a whole. Its value is tied closely to what the planning system will let it become. The same paddock can be worth very different amounts before and after a rezoning.

Rural property loans are secured by working land: grazing, cropping, horticulture and mixed farming. Here the lender is looking at an operating business as well as the ground. In much of Australia, water entitlements have been separated from land title and trade as assets in their own right, so a lender will want to know exactly what water comes with the property.

Land is the oldest security there is, and one of the hardest to lend against. It produces no rent, it costs money to hold, and its value depends on what it can become. Lenders aren't lending against the dirt. They're lending against the plan.

When it helps

• Securing a site before approval. Buying land ahead of rezoning or development approval, when bank appetite is limited until the approvals are in.
• Land banking. Holding land for the medium or long term while planning, infrastructure or the market moves.
• Refinancing a land loan. Replacing a facility that expires before the project is ready to start.
• Releasing equity from land you own. Funding a deposit, planning work or another project.
• Rural purchases and restructures. Buying neighbouring land or restructuring farm debt on a timeline the bank can't meet.

How it works

1. Tell us the scenario. The land, its zoning and planning status, what's owed on it, how much you need, what it's for and when.
2. We match it to lenders. In the first conversation we'll tell you whether it fits a lender in our group or network, and what we need to take it further.
3. The lender assesses it. They value the land, look at holding costs and the exit, and make the credit decision.
4. Funds, then exit. The loan is repaid from a sale, a development facility once approvals are in, or a longer-term refinance, as agreed at the start.

What lenders look at

Because land doesn't pay rent, the first questions are about time and money. How will interest be met while the land is held: from other income, or prepaid or capitalised into the loan? And how long until the next event, whether that's an approval, a sale or a development start?

Then the planning position. Lenders will generally lend against what the land is worth as it stands, not what it may be worth after a rezoning, and at a lower loan-to-value ratio than on income-producing property. Upside that depends on a rezoning is real, but until it happens it's a possibility, not security.

For rural land, add the operating side: what the property produces, its water, its seasonal cash flow and the experience of the people running it. And for every land loan, the exit. A land loan is only as good as the plan to repay it.

What it costs

Land and rural loans from private lenders are priced above lending on income-producing property. The reason is structural: without rent to cover interest, the lender relies on the value of the land and the strength of the exit, and land values move with planning decisions and markets nobody controls. Pricing follows the loan-to-value ratio, the planning position, the holding period and the exit. There are usually establishment fees, and interest is often prepaid or capitalised, because the land itself generates nothing to pay it.

Getting indicative terms costs you nothing, and any fees are agreed with you up front, before any work starts.

This page is general information only. It isn't financial, credit or legal advice and doesn't take into account your particular circumstances. Lending decisions are made by the lender.