Today, more and more banks are seeing vineyard buyers emerge, ready to pursue the dream of becoming wine makers in places like Silicon Valley or San Francisco. The end dream of these entrepreneurs is to have their own label of wine which they will use to lure friends and customers and wine and dine with them.
Demand for vineyard loans
As the demand for loans from vineyard buyers is increasing more and more, many banks are now formalizing loan programs for these buyers and investors. The loans are being defined for a period of ten to fifteen years and come with fixed rates, which makes them perfect for this kind of investments. Many California based banks are offering loan products in adjustable rates where the rate can be reset within a period of ten years.
Existing lending trends
Most vineyard buyers usually visit agricultural banks or community based banks to borrow the funds than going to the big lenders in the business. That is mainly due to the loan terms that are more difficult to bear as compared to the standard home loan products in the market. The mortgages that vineyards attract come with higher rates of interest and have shorter completion terms. What’s more, if you apply for a vineyard mortgage, you might have to face an underwriter’s scrutiny, even for a property that is about one acre in order to evaluate the risks and define the rate and terms for the loan.
The other obstacles that buyers face in case of vineyard purchases are that the loans include larger down payments. That is mostly about thirty percent of the total amount which is much higher than the standard big loans in the home segment where the down payment necessary are ten or fifteen percent.
When one wonders how the interest rate is set for a loan taken for a vineyard, the banks will state that the rates are decided as per the business aspects of the place. That places a higher risk on the property than simply a face value of the place. For that reason most mortgages are priced at least one fourth or one eighth higher than a home loan. The minimum credit scores that the banks require for a vineyard purchase loan to be approved ranges from 680 to 700.
The homes that are purchased with a vineyard also need specialized assessment and appraisal that adds to the cost. While purchase a home will not include a separate appraisal, but in case of a vineyard purchase, an underwriter will be assigned to rate the risks associated with the property and from the point of view of the business flourishing. In these cases the probability of success of the wine making business also needs to be considered in light of the present or past economic scenario as mentioned in article on what is expected from a leader in modern finance as well as the physical weather conditions and the likelihood of the vineyard being able to convert to a successful wine making business within a period of four to five years.