Given your apparent financial position, have you considered a home equity loan?
We went through a scenario similar to you when we tried to refinance our existing mortgage when rates were dropping a few years ago. This was our situation with farm financing:
Fall of year 1 - Bought raw land, 10 acres, about 12 years ago. Put up paddocks and electric rope fencing. Paid cash for the land and materials.
Spring of year 2 - built 7 stall barn using our own funds and “sweat equity.” In other words, had the pole barn shell erected, water and electric done by a great local contractor. We (DH, 2 kids, and I) did the rest of the work - built stalls, framed in and insulated tack and feed rooms. Also had base for future indoor arena put down. (In our northern midwest climate, it is wise to give it at least a winter to settle or heave.) Still used own cash to pay for these expenses.
Summer of year 2 - moved horses to property. Death in the family delayed plans and time frame for building arena this year.
Winter/Spring of year 3 - Applied for financing and got personal loan for arena. Loan was thru local bank that we had a 15+ year mortgage, personal and business relationship with. Credit score similar to yours. Both DH and I successfully and steadily employed/self-employed. With the loan we were now at about a 50% equity position on this property.
Spring of year 5 - applied for construction loan and built home on farm property. Same bank. No problem getting loan. Easily converted to conventional fixed rate mortgage at end of construction.
2008 - the world of mortgages changed…drastically. Glad we were already done with what we needed to do.
Several years later, when interest rates were dropping, we felt it would be worth refinancing. We hit a momentary and monumental dead end.
Same bank took our application. Loan officer said we shouldn’t have any problem given our employment and credit histories and equity position.
Then we heard nothing… for weeks. Phone calls were not returned. What was up? We thought the loan officer was either overwhelmed with re-fis or something strange was up. Eventually I mentioned this to another bank officer. They checked on it and explained that the problem was, as Guilherme mentioned above, the secondary market where they resold their loans had changed rules as a result of the 2008 debacles. They no longer bought “farm” (defined as rural property of 10 acres or more) loans. Our existing mortgage was already at a lower rate than farm credit (in our area that would be Greenstone) offered, so we didn’t pursue refinancing any further.
In the mean time we sold our prior home and DH received an inheritance. We applied both toward paying down the mortgage, as had been our plan all along.
Then an insert with our bank statement offered no application fee home equity loans. Normally I am not a fan of putting my home on the line to finance other purchases, but in this case, the home was on the line for the mortgage anyhow, our balance was relatively small, and the rate was decent.
The home equity loan was made in-house through our same local bank. I went through in a day. Our rate is down at 2.25% with autopay and other incentives they were offering. We kept the monthly payment the same and shortened the term in the process. By the time DH retires in just about 3 years, the loan will have been paid off. (And now with the tax law changes and change in itemizing, we may just choose to pay it off even sooner. We’ll see. Like you, I like to keep some pure cash liquidity.)
Now our only concern is down the road, hopefully a couple of decades, finding a buyer who can come up with cash or find acceptable financing. That could take some waiting. For now, we love our farm and have no plans to sell any time soon.
I never would have thought about a home equity loan had it not been for that insert. Sounds like you may be in a similarly strong and stable financial and property position to the one we were/are in. Give it a thought. It may be the work around to the crazy rule changes and offer a better rate than farm credit too boot. Good luck.
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