Hobby Farm Loan or Farm Finance? What Lenders Really Check Before You Buy Acreage

By Andrew Paterson

You have found the block. A few paddocks, a solid house and maybe room for a couple of cattle or a big veggie patch.

Then the question hits. Will a normal home loan cover this, or does the property push you into farm finance?

The answer shapes your deposit, your rate and whether the deal gets off the ground at all. This guide covers what lenders check on an acreage or hobby farm purchase.

General information only. This is not financial, credit, legal, tax or planning advice. Figures are current as at September 2026 and lender policy changes often, so get advice for your own situation before you act.

Hobby block or working farm? The test lenders use

There is no standalone “hobby farm loan” product. What you usually get is a residential home loan secured against a rural property.

The biggest question a lender asks is where your income comes from. If you earn your living from a job or business elsewhere and any farming is small scale, you are usually in residential lending.

If the property is your main source of income, you move into agribusiness or commercial finance. Residential lenders assess your borrowing power on your personal income, while farm lenders look at the farm’s financials.

A quick self-test helps.

1. Is your main income earned away from the property?
2. Is any farming small scale, with little or no revenue?
3. Is there a liveable dwelling on the land?
4. Is the zoning rural living rather than a farming zone?

Four yeses point towards standard residential lending. A no on any one of them is not an automatic knockout, but expect a broker to ask more questions.

Land size limits and how they affect your LVR

Lenders set their acreage rules in hectares, and their comfort zones are often tighter than buyers expect. One hectare is about 2.47 acres, so a 10 acre block is roughly 4ha.

You may have read that anything under 150 acres gets treated as a normal home. That is about 60ha, which is above the limit many residential lenders will accept at all.

Macquarie’s published broker policy is a useful real example of how the tiers work.

• Up to 4ha: standard LVR limits apply.
• Over 4ha to 10ha: maximum 80% LVR.
• Over 10ha to 20ha: maximum 70% LVR.
• Over 20ha to 40ha: maximum 60% LVR.
• Over 40ha: not acceptable as security.

Those caps can tighten further depending on the property’s location category. Other lenders draw the lines in different places, which is why policy comparison matters so much on acreage.

Lenders mortgage insurance sets an outer boundary too. Helia’s underwriting guidelines accept rural and rural residential properties up to 50ha at up to 95% LVR, provided the property is not income producing.

Size is only one factor. Location, marketability, zoning, access, services and your declared use all carry weight.

Access, water and power

You generally do not need a sealed road, mains water or sewerage. Lenders want reliable all-weather access, and a well-maintained gravel road is commonly accepted.

On services, the usual picture looks like this.

• Tank water and a septic system are normal on rural blocks.
• Power should connect to the grid at a reasonable cost or come from an adequate solar or off-grid system.
• Off-grid homes can be financed, though fewer lenders are comfortable with them.

Location and saleability are the bigger risks. A remote postcode or a thin market with few comparable sales can cut your maximum LVR sharply, however strong your finances are.

It pays to research the area as carefully as the block itself, since lenders and valuers will do the same.

Victorian zoning can change how a lender sees you

Zoning can decide whether a lender treats you as a lifestyle buyer or a farmer, regardless of your plans. Two zones come up most often.

• Rural Living Zone (RLZ): designed for residential use in a rural setting. If the schedule sets no minimum, a lot generally needs to be at least 2ha to subdivide or build a dwelling without a permit.
• Farming Zone (FZ): designed for agriculture. The default minimum is 40ha for subdivision, and a dwelling on a smaller lot usually needs a planning permit.

Some lenders treat Farming Zone land more cautiously, even if you never run a single animal. Local schedules can also vary the defaults, and councils such as Golden Plains, Surf Coast and Greater Geelong each have their own.

Check the zone and schedule for the specific property on the planning scheme. Then make sure it matches what is disclosed in the contract of sale before you sign.

How residential lending compares with farm finance

Once a property tips into working-farm territory, the terms change.

Feature	Residential (lifestyle or hobby)	Agribusiness (working farm)
Deposit	From 5% on smaller blocks, rising as land size increases	Usually much larger, set case by case
Assessed on	Your personal income	Farm income, financials and experience
Pricing	Standard home loan rates	Individually priced and often reviewed
Term and structure	Up to 30 years, principal and interest	Often shorter terms or periodic reviews

Private and non-bank rural lenders sit further out again. They tend to charge higher rates for short-term loans, so they suit specific situations such as bridging a sale rather than long-term ownership.

A worked example

Say you are buying an 8ha lifestyle block for $1,100,000. It has a four-bedroom home, tank water, septic and grid power on a gravel road, and you work full time off the property.

• With a lender capping blocks of this size at 80%, you could borrow $880,000 and need a $220,000 deposit.
• With a lender that will go to 90% on this block, you could borrow $990,000 and need $110,000, though you would also pay LMI.
• Victorian stamp duty on $1,100,000 is about $60,500 in both cases, because the home buyer concession does not apply at this price.

Same property, two lenders and a $110,000 difference in the deposit. The LMI premium narrows that gap, so compare the full upfront cost of each option.

One more catch. Lenders often value the security on the land and the home, leaving out sheds, stables and other farm improvements, so the valuation can come in under the price.

Costs and traps to plan for

Rural purchases carry some costs that suburban buyers rarely see.

• Valuations: rural valuations take more travel and work, so they usually cost more and take longer than a suburban one.
• Environmental checks: old sheep or cattle dips, fuel storage or fill can raise contamination questions that need a specialist report.
• LMI: insurers set their own land size and income-producing limits, so read up on how lenders mortgage insurance works before relying on a small deposit.

If the acreage will be a second home or weekender, allow for ongoing ownership costs and Victorian taxes.

• Land tax: your principal place of residence is generally exempt. Other Victorian land is taxed once total taxable land value reaches $50,000, with a $500 flat charge between $50,000 and $100,000.
• Primary production exemption: farm land can be exempt from land tax, but land used to keep animals or grow crops for personal use does not qualify.
• Stamp duty: general rates apply. Above $960,000, duty is 5.5% of the whole price.

Victoria also offers a young farmer duty exemption or concession on a first farm. It applies to buyers under 35 who run or plan to run a primary production business, so it rarely suits lifestyle buyers.

First home buyers eyeing acreage

The 5% Deposit Scheme changed from 1 October 2025. Income caps and place limits were removed, and the price cap for Melbourne and regional centres such as Geelong is now $950,000.

That helps eligible buyers, but two hurdles remain for acreage.

1. The participating lender’s own land size and security policy still applies, so a large block can fail even if you qualify.
2. The price cap is lower outside major regional centres, at $650,000 for the rest of Victoria.

Your scheme eligibility and the lender’s acreage policy both have to line up. If a tree change is the goal, our look at more affordable tree-change areas is a good starting point.

Get the property assessed before you bid

Generic pre-approval is where acreage buyers often come unstuck. They get approved on a standard basis, buy the block, then run into trouble when the lender assesses the rural security.

A better order is to have the lender’s policy checked against the actual property first. Give your broker the land size, zoning, access, services and location before you make an offer.

Standard home loan pre-approval is still useful, but it rarely covers the security itself. If you are weighing up a rural or lifestyle property, that property-specific conversation is the one to have first.

Frequently asked questions

Can I use a normal home loan to buy a hobby farm?

Often, yes. It works where the property is mainly your home, has a liveable dwelling, is not income producing and fits within the lender’s land size and location policy.

How big can the block be before a residential loan stops being an option?

It depends on the lender. Some cap acreage at 40ha and cut the LVR well before that, while LMI insurer Helia accepts non-income-producing rural properties up to 50ha.

Will my hobby farm be exempt from Victorian land tax?

Your principal place of residence is generally exempt anyway. For a weekender, the primary production exemption needs genuine farming activity, and keeping animals or growing crops for personal use does not count.

How much deposit do I need for a working farm?

Agribusiness lenders set deposits case by case, and they are usually well above residential minimums. Expect the lender to review farm income, business financials and your farming experience.

Why might the valuation come in below the purchase price?

Many lenders and insurers value only the land and home on a rural residential security. Sheds, stables and other farm improvements add to the price you pay but often count for little in the valuation.