Unusual homes are making headlines across Australia. Here is what buyers need to know before they bid.
Australia’s property listings have been full of surprises lately. Unique properties in Australia are attracting serious attention, from a suburban home with a World War II bunker beneath the backyard to a former Tasmanian police station with its original jail cells still intact. A 1930s art deco dance hall 40 metres from a NSW beach and a rural retreat with spa-like amenities have also been drawing buyer interest. These listings are a reminder that the Australian market offers far more variety than the standard suburban home. But unusual homes come with unusual finance questions. Knowing what lenders look for before you start searching can save you considerable time and help you avoid a declined application.
What counts as unusual
Lenders assess every property on its marketability. In practical terms, they want to know: if things went wrong and the bank had to sell, would there be enough buyers to recover the loan?
Standard homes in mainstream suburbs are straightforward to value and resell. Properties with heritage overlays, unusual zoning, mixed residential and commercial use, or buildings adapted from their original purpose all require more careful assessment.
A property adapted from a commercial building, for example, falls into the non-standard category. If you are considering financing a warehouse converted to residential use, you will find that lenders have specific policies around this property type. The same thinking applies to any home that falls outside the mainstream definition of residential.
Heritage and character homes
Heritage-listed properties add another layer to the finance process. When a building is recognised for its historical significance, local councils typically restrict what you can alter, demolish or extend. This limits your renovation options and affects how future buyers will perceive the property.
Lenders are aware of heritage restrictions. Some will lend readily on heritage homes, while others apply stricter loan-to-value ratios or request additional valuations. If you are buying in a small, tightly held historic town, make sure your valuer has comparable sales to draw from. A thin sales record can result in a conservative assessment and a lower maximum loan amount than you expected.
Similar considerations apply to properties built with unconventional building materials such as rammed earth, mud brick or mixed construction. These are assessed on a case-by-case basis, and knowing your lender’s policy upfront avoids unnecessary delays in the approval process.
Zoning and permitted use
Unusual properties often carry unusual zoning. A former police station zoned for community use, a commercial building converted for residential occupation, or a rural property with mixed agricultural and residential zoning may all have restrictions on permitted uses, future subdivision and development potential.
Before you sign anything, check with the relevant local council about what is and is not permitted on the site. Your solicitor and mortgage broker should both review the zoning certificate as part of your due diligence. Some lenders will only approve loans on residentially zoned properties. Knowing the zoning upfront avoids investing time and effort in a finance application that is unlikely to proceed.
Getting the right finance
Not every lender will be comfortable with an unusual property, and a declined application can leave a mark on your credit file. The key is working with a mortgage broker who knows which lenders actively finance non-standard properties and can match your situation to the right one.
Before you start shopping, check your borrowing power to get a realistic sense of your budget. Then follow up with a detailed conversation with your broker about how your chosen property type will be assessed by different lenders. A formal pre-approval in place before you bid at auction or make an offer means you can move quickly and confidently when the right property comes up.
Plan for running costs
Unusual properties often come with higher ongoing costs. Heritage buildings typically require specialist tradespeople for repairs. A property that includes multiple structures, such as a main residence alongside a converted outbuilding, means maintaining two buildings rather than one. Insurance for historic or non-standard properties is also generally higher than for a standard home.
Factor these costs into your monthly budget alongside your loan repayments before you commit to a purchase. If you would like help working through the numbers and finding the right loan structure for your situation, speak with a mortgage broker at Serres Property Finance today.
Common questions
Q: Can I get a standard home loan for a property with unusual zoning?
It depends on the lender. Some banks will only approve loans on residentially zoned land, while others have more flexible policies. Your mortgage broker can identify lenders who will consider your specific property type and arrange the best available terms.
Q: Do heritage listings affect property values?
Heritage listing can work both ways. Some buyers pay a premium for historic character and original features. Others are put off by renovation restrictions. In tightly held historic precincts, demand tends to be consistent, though the buyer pool is smaller than for standard suburban homes. Your valuer will consider local comparable sales when assessing the property.
Q: What should I do before bidding on an unusual property at auction?
Get your finance pre-approved before auction day so you know your exact budget. Have a building and pest inspection completed beforehand, and ask your solicitor to review the zoning certificate and title documents. Auction contracts are unconditional, so there is no cooling-off period after the hammer falls.