Can You Get a Home Loan for a Property with Unapproved Building Works?

Getting a Home Loan for a Property with Unapproved Building Works

Yes, you may be able to get a home loan for a property with unapproved building works, but it can be much harder than buying a standard home.

Unapproved building works can affect the lender’s view of the property as security. Even if your income, deposit and credit history are strong, the lender still needs to be comfortable that the property is legal, marketable, insurable and suitable residential security.

Some lenders may accept minor unapproved works if they do not affect safety, value, habitability or marketability. Others may require the issue to be rectified before settlement. Some may ignore the value or rental income from the unapproved area. Others may decline the property entirely, especially if the works create an illegal second dwelling, structural risk, fire safety issue, commercial use, rooming house arrangement or major compliance problem.

This guide explains how Australian lenders may assess unapproved building works, illegal renovations, garage conversions, unapproved granny flats, non-compliant structures, missing permits and valuation concerns, based on current policy research.

Can you get a home loan with unapproved building works?

Possibly, but it depends on the nature of the works.

A lender may consider the property if:

• the unapproved works are minor
• the main dwelling is legal and habitable
• the property is still marketable
• the issue does not create safety concerns
• insurance is available
• the valuation is acceptable
• the LVR is within policy
• the lender accepts the risk
• the buyer understands the issue
• rectification is not required before settlement

A lender may decline if the works are serious, unsafe, structural, illegal, uninsurable or likely to affect resale value.

What are unapproved building works?

Unapproved building works are renovations, additions, conversions or structures that were completed without the required approvals, permits, certificates or council consent.

These may include:

• unapproved extensions
• garage conversions
• enclosed patios
• second kitchens
• unapproved bathrooms
• illegal granny flats
• sheds converted to living areas
• decks or balconies without approval
• structural wall removals
• unapproved rooms under a house
• illegal dual occupancy use
• unapproved carports
• unapproved pergolas
• converted roof spaces
• unapproved retaining walls
• swimming pools without compliance certificates
• work completed without final inspection

The issue is not always the work itself. The issue is whether the work is legal, compliant and acceptable to the lender.

Why do lenders care about unapproved works?

Lenders care because the property is security for the loan.

If you stop making repayments, the lender may need to sell the property. If the property has illegal or unapproved works, it may be harder to sell, insure or value.

Unapproved works can create concerns about:

• marketability
• safety
• structural integrity
• council enforcement
• insurance
• resale value
• rental income
• habitability
• title and zoning
• future buyer demand
• rectification costs
• legal responsibility

A lender is not only assessing whether you can afford the loan. They are also assessing whether the property is acceptable security.

Does every unapproved structure cause a decline?

No.

Not every unapproved structure will cause a home loan decline.

A small garden shed without formal approval may be treated differently from an unapproved second dwelling rented to tenants.

A lender may take a more flexible view if the issue is:

• minor
• non-structural
• low cost to remove
• not part of the main living area
• not relied on for rental income
• not affecting safety
• common for the area
• not noted as a major issue by the valuer
• not affecting insurability

The more important the unapproved works are to the property’s value or use, the more serious the issue becomes.

What types of unapproved works are more serious?

Some unapproved works are more likely to concern lenders.

These include:

• unapproved granny flats
• illegal secondary dwellings
• garage conversions used as bedrooms
• unapproved bathrooms or kitchens
• structural additions
• enclosed areas below legal height
• non-compliant decks or balconies
• swimming pool compliance issues
• unapproved retaining walls
• unapproved rooming house setups
• commercial use without approval
• work affecting fire safety
• work affecting waterproofing or drainage
• work that changes the number of dwellings

These issues can affect safety, valuation, insurance and resale.

What if the unapproved works are only minor?

Minor unapproved works may be acceptable with some lenders.

Examples may include:

• small garden shed
• minor pergola
• small non-structural alteration
• cosmetic renovation
• low-value structure
• removable feature
• minor enclosure not used as habitable space

A lender may still rely on the valuation.

If the valuer makes no adverse comment, the application may proceed normally.

If the valuer notes the issue, the lender may ask for more information or reduce the value.

What if the works are structural?

Structural unapproved works are more serious.

Structural works may include:

• removing load-bearing walls
• adding rooms
• extending the roofline
• building decks or balconies
• changing foundations
• adding upper levels
• altering retaining walls
• converting garages into habitable areas
• major bathroom or plumbing relocation

A lender may be concerned if there is no evidence that the work was designed, approved and inspected properly.

They may ask for engineering reports, building certificates, council approval or rectification evidence.

What if the property has an unapproved extension?

An unapproved extension can affect approval.

The lender may ask:

• when was the extension built?
• was council approval required?
• was approval obtained?
• was there a final inspection?
• is there an occupation certificate?
• is the extension structurally sound?
• is it included in the valuation?
• can it be insured?
• would council require rectification or removal?

If the extension adds significant living area, the lender may not rely on that value unless the issue is resolved or accepted.

What if a garage has been converted into a bedroom?

Garage conversions are common, but they can create problems.

A converted garage may not meet legal requirements for habitable space.

A lender may ask:

• was the conversion approved?
• does it meet ceiling height requirements?
• is there proper insulation?
• is there waterproofing?
• is there ventilation?
• is there safe access?
• was parking removed in breach of approval?
• is the room included as a bedroom in the valuation?

If the garage conversion is unapproved, the lender may ignore it as habitable space or treat it as a risk.

What if a shed has been converted into accommodation?

This can be difficult.

A shed converted into living space may be illegal if it does not meet dwelling standards.

A lender may be concerned about:

• building approval
• plumbing compliance
• electrical compliance
• fire safety
• insulation
• ceiling height
• waterproofing
• sewerage
• habitability
• insurance
• rental legality

If the shed is being used as a granny flat or rental dwelling without approval, some lenders may decline.

What if there is an unapproved granny flat?

An unapproved granny flat can be a major issue.

The lender may not accept rental income from the granny flat if it is not legally approved.

They may also reduce the valuation or decline the property if the granny flat affects marketability.

A lender may ask:

• is it council-approved?
• is there a final occupation certificate?
• is it legally a secondary dwelling?
• is it rented separately?
• is the rent being used for servicing?
• does it have separate services?
• is it safe and compliant?
• can it be insured?
• has the valuer noted concerns?

If the loan relies on granny flat rent, approval can become much harder.

What if the property has an illegal second dwelling?

An illegal second dwelling is more serious than a minor renovation.

It may include:

• second kitchen without approval
• separate bathroom and entry
• downstairs area rented separately
• garage converted into self-contained unit
• backyard studio used as accommodation
• two tenancies where only one dwelling is approved
• dual occupancy without development approval

Lenders may be cautious because the property may not comply with council requirements and may not be legal to rent as advertised.

What if the property is advertised as dual income?

Be careful.

Properties advertised as “dual income” can attract lender scrutiny.

A lender may ask:

• are both dwellings approved?
• is rental income legal?
• are there separate leases?
• is it a boarding house or rooming house?
• is the second dwelling council-approved?
• is income from Airbnb or short-stay use?
• does the valuation support the rental figure?
• does the property have appropriate development approval?

Based on current policy research, income from renting individual rooms or multiple dwellings without appropriate development approval can be unacceptable with some lenders.

Can rental income from unapproved works be used?

Usually, this is difficult.

A lender may not use rent from an unapproved dwelling, unapproved rooming arrangement or illegal conversion.

The lender may be concerned that:

• the rental use is not legal
• council could stop the use
• the lease may not be enforceable
• insurance may not cover the use
• the tenant arrangement affects marketability
• income may not continue
• the valuer may not support the rental figure

If rent is important for borrowing power, approval evidence is critical.

What if tenants are already living in the unapproved area?

This can make the issue more serious.

A lender may ask:

• is the tenancy legal?
• is there a written lease?
• is the dwelling approved?
• is the space habitable?
• is it insured?
• does council allow the use?
• are there safety concerns?
• is rent being declared?
• will the tenancy continue after settlement?

An existing tenant does not automatically make the income acceptable.

What if the unapproved works are not being used?

If the unapproved area is not being used as habitable space or rental accommodation, the issue may be less serious.

For example, a storage shed without approval may be less concerning than an unapproved studio rented to a tenant.

A lender may still consider:

• cost to remove
• safety risk
• visibility
• council enforcement risk
• impact on value
• impact on insurance
• valuation comments

If the unapproved works are minor and not relied on, some lenders may proceed.

What if the valuer does not mention the unapproved works?

If the valuer does not mention the issue, the lender may not focus on it.

However, this does not mean the works are legal.

A lender may still become aware of the issue through:

• contract documents
• building report
• council search
• buyer disclosure
• solicitor correspondence
• rental evidence
• property listing
• photos
• insurance documents

You should not hide known unapproved works from the lender or solicitor.

What if the valuer mentions unapproved works?

If the valuation report mentions unapproved works, the lender will usually review the issue.

The valuer may make comments such as:

• no evidence of approval sighted
• unapproved addition
• illegal conversion
• limited marketability
• council approval should be confirmed
• works may not comply
• property includes non-permitted improvements
• rental income may not be sustainable
• value assessed excluding improvements

The lender may then ask for documents, reduce the LVR, require rectification or decline.

What if the valuation excludes the unapproved area?

This can reduce your borrowing capacity.

For example, if the property is advertised as a five-bedroom home but two bedrooms are in an unapproved garage conversion, the valuer may assess it as a three-bedroom home.

This can affect:

• property value
• LVR
• borrowing capacity
• mortgage insurance
• purchase price support
• rental income
• resale assumptions

You may still be able to buy, but the loan may be based on a lower valuation.

What if the valuation says “subject to council approval”?

A valuation may be made subject to certain conditions.

If the valuation is subject to council approval being confirmed, the lender may require evidence before formal approval or settlement.

This evidence may include:

• council approval
• building certificate
• occupation certificate
• final inspection certificate
• certifier documents
• approved plans
• compliance certificate

If the condition cannot be satisfied, the lender may not proceed.

What if the valuation says “as is”?

An “as is” valuation may mean the valuer has assessed the property in its current condition.

This does not automatically mean the lender accepts all risks.

The lender may still review:

• whether works are legal
• whether insurance is available
• whether the property is marketable
• whether the value is reliable
• whether LVR is acceptable
• whether rental income can be used
• whether the valuer made adverse comments

The lender’s credit policy still matters.

Can a building report affect the loan?

Yes.

A building report may reveal unapproved or defective works.

Issues may include:

• structural movement
• unsafe deck
• non-compliant stairs
• water leaks
• poor waterproofing
• illegal conversion
• missing permits
• termite damage
• electrical concerns
• plumbing issues
• roof defects

If the lender receives the report or the valuer notes similar concerns, approval may be affected.

Can a pest report affect the loan?

Yes, if it shows major damage or safety risk.

A pest issue may matter if it affects:

• structural integrity
• habitability
• valuation
• repair cost
• insurance
• marketability
• buyer funds to complete

Termite damage combined with unapproved works can make the property riskier.

Does council approval matter?

Yes.

Council approval is often critical where the works change the dwelling, use, floor area or occupancy.

A lender may ask for:

• development approval
• building approval
• complying development certificate
• occupation certificate
• final inspection certificate
• approved plans
• building certificate
• council records
• certifier documents

If approval documents are missing, lender options may reduce.

What is a building certificate?

A building certificate may provide some comfort that council will not take enforcement action for certain existing works for a specified period.

It does not always mean the works were originally approved.

A lender may still review:

• what the certificate covers
• whether it covers all unapproved works
• whether any exclusions apply
• whether the property is insurable
• whether the valuer accepts it
• whether the lender policy accepts it

A building certificate can help, but it may not solve every issue.

What is an occupation certificate?

An occupation certificate can confirm that a building or part of a building is suitable for occupation under the relevant approval process.

A lender may ask for an occupation certificate where:

• a new dwelling was built
• an extension was completed
• a granny flat was added
• a garage was converted
• construction was recently finished
• the valuation requires completion evidence

If the certificate is missing, the lender may ask why.

What if final inspection was never completed?

This can be a problem.

A property may have approval to build but no final sign-off.

A lender may ask:

• why was final inspection not completed?
• what work remains unfinished?
• can the certificate still be obtained?
• are there defects?
• is the property habitable?
• is insurance valid?
• does the valuation require completion?

If final approval is required but missing, settlement may be delayed.

What if the seller says the works are “exempt development”?

Some minor works may not require full approval, depending on state and council rules.

However, the lender may still require evidence if the valuer or solicitor raises concerns.

You may need:

• council confirmation
• certifier advice
• planning certificate
• building report
• written evidence from a qualified professional
• solicitor advice

A seller’s verbal statement may not be enough.

What if the works were done before the current owner bought the property?

This does not automatically remove the issue.

Unapproved works can stay with the property.

A lender may still ask whether:

• the works are legal
• council could require rectification
• the property can be insured
• the valuation includes the works
• the buyer is accepting the risk
• the issue affects marketability

Even old works may matter if they affect value or legal use.

What if the works are very old?

Older unapproved works may be less concerning in some cases, especially if they are common, stable and not subject to current enforcement.

However, age alone does not guarantee acceptance.

The lender may still consider:

• safety
• structural integrity
• council records
• marketability
• insurance
• valuation comments
• whether the works are part of habitable space
• whether rental income relies on the works

Old unapproved works can still affect lending if they are material.

What if the works can be removed easily?

If the unapproved works can be removed easily, the lender may be more comfortable.

For example:

• small shed
• removable partition
• non-structural enclosure
• temporary fixture
• minor deck
• small pergola

The lender may ask whether the property remains acceptable without that improvement.

If the works are central to the property’s value or use, removal may not be a simple solution.

What if rectification is required?

A lender may require rectification before settlement or as a condition of approval.

Rectification may involve:

• obtaining retrospective approval
• removing illegal works
• completing final inspection
• repairing unsafe structures
• providing engineering certification
• obtaining occupation certificate
• updating insurance
• confirming compliance
• reducing purchase price
• escrowing funds, where available

Not all lenders allow post-settlement rectification.

Can the lender approve subject to rectification after settlement?

Sometimes, but this is lender-specific.

Some lenders may require the issue to be fixed before settlement. Others may accept a condition that works are completed after settlement if the risk is minor.

A lender may consider:

• severity of issue
• repair cost
• safety risk
• LVR
• borrower cash buffer
• valuation comments
• insurance position
• whether the property is habitable
• whether the issue affects security value

Major compliance problems are less likely to be accepted after settlement.

Can you use loan funds to fix unapproved works?

Possibly.

A lender may allow funds for repairs or renovations if the purpose is acceptable and supported.

Based on current policy research, some lenders require evidence such as quotes, invoices, tenders or a building contract before releasing funds for repairs or renovations to the security property.

A lender may also require borrowers to sign an undertaking confirming funds will be used for the disclosed renovation purpose.

For larger works, construction or renovation loan rules may apply.

Can you borrow extra to legalise the works?

Possibly, but the lender may be cautious.

Borrowing extra to legalise or rectify unapproved works may require:

• council advice
• builder quote
• engineer report
• certifier quote
• fixed-price contract
• renovation plan
• evidence of funds to complete
• valuation as-is and as-complete
• acceptable LVR
• acceptable loan purpose

Some lenders may not allow cash out for certain construction or development purposes.

What if the works require construction finance?

If rectification or completion is significant, the lender may treat the loan as construction or renovation finance.

This may require:

• council-approved plans
• licensed builder
• fixed-price contract
• progress payment schedule
• builder insurance
• valuation on completion
• borrower contribution
• evidence of contingency funds
• final inspection evidence

A standard purchase loan may not be suitable if the property needs major works.

Related research: How Do Construction Loan Progress Payments Work?

Can you buy first and fix later?

Possibly, but this is risky.

You should only do this if:

• the lender accepts the property as-is
• insurance is available
• you understand the rectification cost
• council risk is manageable
• the property is safe and habitable
• you have funds to complete repairs
• your solicitor confirms the legal risk
• the valuation supports the purchase

If the lender requires rectification before settlement, you may not be able to buy first and fix later.

Related research: Can You Buy Land First and Add a Building Contract Later Under the 5% Deposit Scheme?

What if the property is not habitable?

A property that is not habitable is much harder to finance with a standard home loan.

A lender may consider the property unacceptable if it lacks:

• functioning kitchen
• functioning bathroom
• safe access
• electricity
• water
• sewerage
• weatherproofing
• structural soundness
• occupancy certificate, where required

If the property is not habitable, construction finance, specialist finance or cash purchase may be required.

What if only part of the property is not habitable?

If the main dwelling is habitable but an unapproved addition is not, the lender may still consider the property.

They may ask:

• is the unsafe area excluded from value?
• can it be secured or removed?
• does it affect access?
• does it affect insurance?
• does it affect marketability?
• does council require action?
• is the main house acceptable?

If the non-habitable area is minor, some lenders may proceed. If it affects the whole property, approval is harder.

What if the unapproved works affect insurance?

This can be a serious issue.

Lenders usually require the property to be insured.

Unapproved works can affect insurance if:

• they are not covered
• they create fire risk
• they create structural risk
• they breach building regulations
• the insurer excludes certain areas
• the property is used illegally
• the building is not compliant

If insurance cannot be obtained or excludes major parts of the property, lender approval may be difficult.

What if the insurer will not cover the unapproved works?

The lender may ask whether the property is still acceptable security.

They may consider:

• does insurance cover the main dwelling?
• are the unapproved works material?
• can the works be removed?
• can they be legalised?
• does the valuation include them?
• does the issue affect safety?
• is the property marketable?

If the uninsured area is significant, approval may be affected.

What if council could order demolition?

This is a major risk.

If council can require removal or demolition of the unapproved works, the lender may worry about reduced property value.

The lender may ask:

• has council issued any notices?
• is there a building order?
• is there a compliance notice?
• is demolition required?
• can retrospective approval be obtained?
• what would the property be worth without the works?
• are funds available to fix the issue?

If enforcement action is already underway, lender options can be limited.

What if there is a council notice or building order?

A council notice or building order can make approval much harder.

A lender may ask for:

• copy of the notice
• required works
• compliance deadline
• cost estimate
• evidence works are completed
• council confirmation
• solicitor advice
• valuation impact
• funds to complete rectification

Some lenders may not settle until the notice is resolved.

What if the seller agrees to fix the works before settlement?

This can help.

The lender may require evidence that works are fixed before settlement.

Evidence may include:

• council approval
• final inspection
• occupation certificate
• compliance certificate
• builder invoice
• engineer certificate
• updated valuation
• solicitor confirmation
• insurance confirmation

The contract should clearly set out who is responsible and when the work must be completed.

What if the seller refuses to fix the works?

If the seller refuses to fix the works, you need to decide whether the property is still financeable and worth the risk.

The lender may:

• approve as-is
• reduce the valuation
• require a lower LVR
• ignore rental income
• request more documents
• require rectification
• decline the property

A solicitor or conveyancer should advise you on the legal risk before you proceed.

Can the purchase price be reduced?

Possibly.

A lower purchase price may help if the valuation is reduced due to unapproved works.

However, a lower price does not solve all issues.

The lender may still care about:

• safety
• legality
• insurance
• habitability
• council enforcement
• rental legality
• marketability

A discount helps only if the property remains acceptable security.

What if the property is sold “as is”?

Buying “as is” means you may accept the property in its current condition, but the lender does not have to accept the same risk.

The lender may still require:

• valuation
• approval evidence
• insurance
• rectification
• lower LVR
• confirmation of habitability
• acceptable title and zoning

A seller’s “as is” condition does not override lender policy.

Can a first-home buyer buy a property with unapproved works?

Possibly, but it can be risky.

First-home buyers often have smaller deposits and may rely on lenders mortgage insurance or government schemes.

Unapproved works can create problems if:

• LVR is high
• LMI applies
• valuation is reduced
• the property is non-standard
• deposit is tight
• repairs are needed
• the property is not habitable
• rental income from illegal works is needed

First-home buyers should be especially careful before going unconditional.

Can you use a low deposit?

Possibly, but high-LVR loans are more sensitive to property risk.

A lender may be less flexible if:

• LVR is above 80%
• LMI applies
• the valuation has adverse comments
• approval documents are missing
• works are structural
• the property has limited marketability
• rental income relies on unapproved areas
• rectification costs are unknown

A larger deposit or lower LVR can sometimes improve options.

Does LVR matter with unapproved building works?

Yes, LVR matters.

LVR means loan-to-value ratio. It compares the loan amount to the property value.

An application may be stronger if:

• LVR is lower
• no lenders mortgage insurance is required
• the property remains marketable
• the issue is minor
• the valuation is acceptable
• the buyer has funds to rectify
• the main dwelling is legal and habitable
• the lender accepts the risk

Higher LVR leaves less room for valuation or rectification risk.

Does lenders mortgage insurance affect these applications?

Yes.

If lenders mortgage insurance applies, unapproved works can become a bigger problem.

Mortgage insurers may be cautious where:

• the valuation notes illegal works
• the property has limited marketability
• rental income is from an unapproved dwelling
• the property is high LVR
• council approval is missing
• the works affect safety
• the property has multiple dwellings without approval
• the property is not standard residential security

Even if the lender might consider the property, the mortgage insurer may decline.

Can professionals use an LMI waiver?

Possibly, if they qualify and the property is acceptable.

An LMI waiver can remove the mortgage insurance issue, but it does not make an unacceptable property acceptable.

A lender may still decline if the property has:

• illegal dwelling use
• major unapproved structural works
• serious valuation concerns
• safety issues
• limited marketability
• insurance problems
• unacceptable zoning or title issues

The property still needs to meet the lender’s security policy.

Can you refinance a property with unapproved works?

Possibly.

A refinance may be easier if the lender already has a good valuation and the works are minor, but a new lender will still assess the property.

They may review:

• current valuation
• council approval documents
• insurance
• rental income
• title and zoning
• cash-out purpose
• LVR
• current mortgage conduct
• whether the works were completed after purchase

If you built unapproved works after buying, the new lender may assess the property differently from your current lender.

Can you release equity from a property with unapproved works?

Possibly, but the lender may be cautious.

A lender may consider:

• valuation comments
• LVR after cash out
• purpose of funds
• whether funds will rectify the works
• insurance
• marketability
• current loan conduct
• whether the property is still acceptable

If the unapproved works reduce valuation or create security risk, the amount of available equity may be lower than expected.

Can you refinance to pay for rectification?

Possibly.

A lender may allow equity release or renovation funds to rectify the issue if the purpose is acceptable and evidence is provided.

They may ask for:

• council notice
• builder quote
• engineer report
• certifier report
• scope of works
• fixed-price contract
• evidence of funds to complete
• valuation on completion
• updated insurance

The lender may want to control the release of funds for major works.

Can you get a construction loan to fix unapproved works?

Possibly.

If the rectification is substantial, construction finance may be required.

This may apply where you need to:

• rebuild an extension
• legalise a second dwelling
• complete unfinished works
• repair structural issues
• obtain final occupation approval
• replace unsafe works
• convert illegal works into approved works

Construction loans usually require stronger documentation and staged payments.

What if the property has unapproved works and you want to renovate more?

This can become complex.

The lender may need to understand:

• what is existing
• what is unapproved
• what will be removed
• what will be retained
• what new works are planned
• whether approvals are in place
• total project cost
• end valuation
• whether construction finance is needed
• whether the property will remain habitable

The more complex the works, the less likely a simple standard loan will be enough.

Can investment properties with unapproved works be financed?

Possibly, but rental income and tenancy risk matter.

A lender may ask:

• are the works legal?
• are tenants occupying approved areas only?
• is the rent from legal accommodation?
• does insurance cover the rental use?
• does the valuation support the rent?
• is the property a rooming house?
• are there multiple tenancies without approval?
• is council enforcement possible?

Investment properties with unapproved rental areas can be much harder to finance.

What if the unapproved area is rented separately?

This is a major issue.

A lender may be concerned if an unapproved area is rented as:

• a separate dwelling
• granny flat
• studio
• converted garage
• downstairs flat
• rooming house
• student accommodation
• short-stay accommodation

If the rental use is not legal, the lender may ignore the income or decline the property.

What if the property is being used as a boarding house?

Boarding houses and rooming houses are treated differently from standard residential homes.

A property may be considered non-standard if it has:

• room-by-room leases
• multiple unrelated tenants
• locks on bedrooms
• shared common facilities
• fire safety requirements
• council approval requirements
• high rental yield based on rooming use
• commercial management

Many residential lenders will not treat this as standard residential security.

Related research: Can You Get Finance for a Boarding House, Rooming House or Co-Living Property?

What if the property is student accommodation?

Student accommodation can be sensitive.

A standard house leased to students under a normal residential tenancy may be acceptable.

A property configured as specialist student accommodation or room-by-room rental may be treated differently.

The lender may ask:

• is the use approved?
• is there appropriate development approval?
• are rooms rented individually?
• is the property close to campus?
• is the property marketable to ordinary buyers?
• does the valuation classify it as specialised accommodation?

Specialised accommodation can reduce lender options.

Related research: Can You Get a Home Loan for Student Accommodation?

What if the property has Airbnb income from unapproved works?

Airbnb income from an unapproved area can be difficult to use.

The lender may ask:

• is short-stay use legal?
• is the space approved as habitable?
• is council approval required?
• is insurance valid?
• how long has income been received?
• is income declared?
• does the valuation support standard rent?

Some lenders may use a standard rental appraisal instead of Airbnb income. Others may ignore the income entirely.

What if the property is mixed-use?

Mixed-use property adds complexity.

If unapproved works are used for business purposes, the lender may ask:

• what part is residential?
• what part is commercial?
• is there a commercial lease?
• is the use legal?
• does zoning allow it?
• can the property be sold as residential?
• does the valuation support residential lending?

Mixed-use security may have lower LVR limits or require specialist lending.

What if the unapproved works are on rural residential land?

Acreage or rural residential properties already require more review.

Unapproved works may add further concerns about:

• septic approval
• water supply
• access
• sheds used as accommodation
• farm structures converted to dwellings
• council approval
• bushfire compliance
• marketability
• insurance

A rural property with unapproved dwellings may be much harder than a suburban house with a small shed.

Related research: Can You Get a Home Loan for a Hobby Farm or Rural Residential Property?

What if the property is in a flood or bushfire zone?

Flood and bushfire risk can make unapproved works more serious.

A lender may ask whether the unapproved works meet:

• flood planning rules
• bushfire attack level requirements
• fire safety rules
• evacuation requirements
• building standards
• insurance requirements

If the works are in a high-risk zone and not approved, the lender may be more cautious.

What if there is no certificate for a deck or balcony?

Decks and balconies can be serious because of safety risk.

A lender or valuer may be concerned if:

• the deck is elevated
• the structure is old
• there is no approval
• there are visible defects
• the balcony is unsafe
• handrails are non-compliant
• structural supports are poor
• building report raises concerns

A minor ground-level deck may be easier than an elevated balcony with structural issues.

What if a swimming pool is not compliant?

Swimming pool compliance can affect settlement and insurance.

Issues may include:

• missing pool safety certificate
• non-compliant fencing
• unsafe gate
• unapproved pool
• missing final inspection
• council notice
• incomplete pool registration

A lender may ask for compliance evidence depending on the state, contract and valuation.

Pool compliance can also be a legal settlement issue, not just a lending issue.

What if retaining walls are unapproved?

Retaining walls can be serious if they affect structural stability, drainage or neighbouring land.

A lender may be concerned if:

• the wall is high
• the wall is failing
• council approval was required
• an engineer was needed
• there is drainage risk
• neighbouring property is affected
• the building report raises safety concerns
• rectification costs are high

Unapproved retaining walls can affect value and insurability.

What if plumbing or electrical work is not certified?

Uncertified plumbing or electrical work can raise safety and insurance concerns.

This may include:

• unapproved bathroom additions
• second kitchens
• laundries in converted spaces
• illegal wiring
• unsafe switchboards
• non-compliant plumbing
• sewerage issues
• water leaks

A lender may not inspect every detail, but a building report or valuation comment can trigger further review.

What if waterproofing is defective?

Defective waterproofing can create significant repair costs.

This may affect:

• bathrooms
• balconies
• laundries
• kitchens
• extensions
• converted areas

A lender may be concerned if the defect is serious, visible or noted in the valuation or building report.

What if the property has termite damage and unapproved works?

This combination can be difficult.

The lender may review:

• extent of termite damage
• structural impact
• repair quote
• building report
• valuation comments
• whether works are safe
• whether insurance is affected
• whether the property remains habitable

If both compliance and structural risks exist, lender options may reduce.

What if the seller built the works as an owner-builder?

Owner-builder works can be acceptable if properly approved and insured, but they can also raise questions.

A lender may ask for:

• owner-builder permit
• insurance
• final inspection
• occupation certificate
• building approvals
• warranty documentation, where applicable
• evidence works are complete
• valuation comments

If owner-builder works are incomplete or unapproved, the lender may be more cautious.

What if the property is newly renovated?

A newly renovated property can still have approval issues.

A lender may ask whether renovations were:

• cosmetic
• structural
• approved
• finalised
• certified
• insured
• reflected in the valuation
• completed by licensed trades

A fresh renovation does not guarantee compliance.

What if the renovation is incomplete?

An incomplete renovation may require construction or renovation finance.

The lender may consider:

• whether the property is habitable
• how much work remains
• cost to complete
• whether the borrower has funds
• valuation as-is
• valuation on completion
• builder contract
• council approvals
• insurance

A standard loan may not be available if the property is substantially incomplete.

What if the property is a deceased estate?

Deceased estate properties sometimes have older unapproved works.

A lender may still need to assess:

• property condition
• approval status
• valuation
• habitability
• insurance
• any council notices
• whether the executor can provide documents
• whether rectification is needed

Old family ownership does not remove the need for property due diligence.

What if the vendor cannot provide approvals?

If the vendor cannot provide approval documents, you may need to investigate further.

Options may include:

• council search
• building certificate application
• private certifier review
• building inspection
• solicitor advice
• retrospective approval inquiry
• price renegotiation
• finance clause extension

A lender may not proceed simply because documents are unavailable.

Can retrospective approval be obtained?

Sometimes, but not always.

Retrospective approval may depend on:

• council rules
• building standards
• age of works
• structural compliance
• fire safety
• zoning
• setbacks
• parking
• stormwater
• heritage rules
• documentation available

Some works may be impossible or too expensive to approve retrospectively.

What if retrospective approval is not possible?

If retrospective approval cannot be obtained, the lender may require the works to be removed or may decline the property.

Other options may include:

• buying at a lower price
• proceeding with a lender that accepts the risk
• reducing LVR
• excluding value from unapproved works
• arranging rectification
• choosing another property
• obtaining legal advice before proceeding

Do not assume every issue can be fixed after settlement.

Can you get finance if the contract has a finance clause?

A finance clause can protect you if the lender declines due to the property.

However, finance clauses have deadlines and conditions.

If unapproved works are discovered, you may need:

• lender review
• valuation report
• council documents
• extension of finance date
• solicitor advice
• building inspection
• revised approval

A finance clause is helpful, but only if the issue is identified before the deadline.

What if you bought at auction?

Auction purchases are usually unconditional.

If you buy a property with unapproved works at auction and finance is declined, you may still be legally required to settle.

This is risky.

Before bidding, consider checking:

• contract documents
• council approvals
• building reports
• title and zoning
• valuation risk
• lender policy
• LVR
• availability of backup lenders

Auction purchases with unapproved works should be approached carefully.

What documents should you collect before applying?

Useful documents may include:

• contract of sale
• title search
• council approval documents
• building approvals
• occupation certificate
• final inspection certificate
• approved plans
• building certificate
• pest and building report
• engineer report
• renovation quotes
• rectification quotes
• rental appraisal
• lease agreement
• insurance confirmation
• council notices, if any
• solicitor advice

The more evidence you provide, the easier it is for a lender to assess the risk.

What should you ask the selling agent?

Before applying, ask:

• are all structures approved?
• are approval documents available?
• was the granny flat approved?
• is any part of the property rented separately?
• are there council notices?
• were renovations completed by licensed builders?
• is there an occupation certificate?
• is there a building certificate?
• were any works completed by an owner-builder?
• are there insurance issues?

Do not rely only on verbal answers. Ask for documents.

What should your solicitor or conveyancer check?

Your solicitor or conveyancer may help review:

• contract disclosures
• title
• zoning
• council certificates
• building approvals
• special conditions
• notices or orders
• easements
• restrictions
• unapproved structures
• settlement risk

They can advise on legal risk, but the lender still makes its own security decision.

What should your broker check?

A broker can help check lender policy before applying.

This may include:

• whether the lender accepts the property type
• whether the works affect security
• whether rental income can be used
• whether LVR is acceptable
• whether LMI is likely to be an issue
• whether rectification funds can be borrowed
• whether construction finance is needed
• whether valuation risk is high
• whether another lender is more suitable

This can help avoid unnecessary declines.

10 common mistakes with unapproved building works

1. Do not assume the lender will ignore unapproved works.
2. Do not assume a high income will overcome property risk.
3. Do not rely on rent from an unapproved dwelling.
4. Do not assume the valuation will include illegal improvements.
5. Do not assume the seller’s verbal statement is enough.
6. Do not buy at auction without checking approvals.
7. Do not assume retrospective approval is easy.
8. Do not ignore insurance risk.
9. Do not forget that LMI may be stricter than the lender.
10. Do not apply to a lender before checking whether the security is acceptable.

How to improve your chances of approval

Before applying, it helps to prepare the property evidence properly.

Useful steps include:

• identify exactly what works are unapproved
• obtain council records
• obtain building approval documents
• check whether final inspection was completed
• get a building inspection
• get quotes for rectification
• confirm insurance availability
• avoid relying on illegal rental income
• confirm the property is habitable
• check zoning and permitted use
• provide rental evidence only where the use is legal
• keep LVR as low as practical
• avoid unconditional contracts where possible
• compare lender policy before applying

The clearer the issue and the lower the risk, the easier the lender assessment may be.

Should you wait before applying?

Sometimes waiting can help.

Waiting may improve your options if:

• approval documents are missing
• retrospective approval is pending
• rectification works are underway
• final inspection has not been completed
• a building certificate is being obtained
• the seller is fixing the issue
• the lender requires more evidence
• the valuation is conditional
• LMI applies

You may not need to wait if:

• the issue is minor
• the valuer does not raise concerns
• the property is habitable
• insurance is available
• LVR is low
• the lender accepts the risk
• rental income is not reliant on the works

A broker can compare whether applying now or waiting for documents would give you better lender options.

Example scenarios

Scenario 1: Small unapproved shed

You buy a house with a small unapproved garden shed.

Some lenders may proceed if the shed does not affect value, safety, insurance or marketability.

Scenario 2: Unapproved garage bedroom

A garage has been converted into a bedroom without approval.

The lender may ignore that room as habitable space, reduce value or request approval evidence.

Scenario 3: Illegal granny flat with rent

The property has a granny flat rented separately, but there is no council approval.

The lender may ignore the rental income or decline if the property is considered non-standard or risky.

Scenario 4: Unapproved extension

The home has a large extension without final approval.

The lender may require council documents, final inspection, a building certificate or rectification before settlement.

Scenario 5: Valuation excludes the works

The valuer assesses the property as if the unapproved area has no value.

This may reduce the amount you can borrow or require a larger deposit.

Scenario 6: Seller fixes issue before settlement

The seller obtains final approval or removes the unapproved structure before settlement.

This may improve lender acceptance if evidence is provided.

So, can you get a home loan for a property with unapproved building works?

Yes, you may be able to get a home loan for a property with unapproved building works, but the details matter.

The strongest applications usually have:

• minor or low-risk unapproved works
• habitable main dwelling
• clear council documents
• acceptable valuation
• available insurance
• low or moderate LVR
• no reliance on illegal rental income
• no serious safety issues
• no active council notices
• acceptable marketability
• lender policy that can accept the risk

A small unapproved structure may not stop approval. An illegal dwelling, unsafe structural work, unapproved rental accommodation or major compliance issue can make the property much harder to finance.

Need help getting a loan for a property with unapproved works?

A mortgage broker can help compare lenders that may consider properties with unapproved building works, unapproved renovations, granny flats, secondary dwellings, garage conversions, valuation concerns or rectification needs.

We can review the contract, valuation risk, council documents, rental income, LVR, deposit, insurance position and borrowing power before you apply.

If you are buying or refinancing a property with unapproved works, speak with a mortgage broker who understands how different lenders assess non-standard residential security.