Can You Get a Home Loan for an Old, Derelict or Uninhabitable House?

Getting a Home Loan for an Old, Derelict or Uninhabitable House

Yes, you may be able to get finance for an old, derelict, damaged or uninhabitable house, but standard home loan approval can be difficult if the property is not safe, insurable, liveable or acceptable as residential security.

A lender may be comfortable with an older home that needs cosmetic renovation. They may be much less comfortable with a property that has no working kitchen or bathroom, major structural damage, termite damage, fire damage, missing services, no building insurance, incomplete approvals or is effectively land value only.

This guide explains how lenders may assess old houses, derelict homes, renovator properties, uninhabitable dwellings, damaged homes and properties needing major repairs, based on current policy research.

Can you get a home loan for an old house?

Yes, often.

An old house is not automatically a problem.

Many older homes can be financed if they are:

• structurally sound
• habitable
• insurable
• marketable
• connected to essential services
• approved as a residence
• valued as residential property
• not affected by major defects
• acceptable to the lender

Age alone is usually less important than condition, safety, insurance and valuation.

Can you get finance for a derelict house?

Possibly, but it is much harder.

A derelict house may not be accepted as standard residential security if it is unsafe, uninhabitable or unable to be insured.

The lender may treat the property as:

• land value
• vacant land with improvements
• renovation property
• construction security
• specialised security
• unacceptable residential security

The finance pathway depends on how serious the condition issues are.

What does “uninhabitable” mean for lending?

Uninhabitable generally means the property is not reasonably fit to live in as a normal home.

This may involve:

• no functioning kitchen
• no functioning bathroom
• no working toilet
• no electricity
• no water
• no sewer or septic
• severe structural damage
• fire damage
• storm damage
• termite damage
• unsafe wiring
• major roof leaks
• missing walls or windows
• severe mould
• contamination
• council notices
• no occupancy approval

A property does not need to be perfect, but it generally needs to be lawful, safe and insurable.

Why are uninhabitable houses hard to finance?

Uninhabitable houses are difficult because lenders rely on the property as security.

A lender may worry that:

• the property cannot be insured
• the property cannot be occupied
• the property may not sell easily
• repair costs may be unknown
• the borrower may run out of money
• the valuation may be land value only
• council may require demolition or rectification
• the property may not meet residential lending policy

Even if the borrower has strong income, the property still needs to be acceptable.

Can a lender decline because the house is too damaged?

Yes.

A lender may decline if the property is not acceptable residential security.

This can happen where the dwelling has:

• major structural defects
• fire or flood damage
• no working services
• no building insurance
• incomplete construction
• major safety risks
• severe termite damage
• unapproved works
• council demolition orders
• very poor marketability

The lender is not only assessing whether the borrower can repay. They are assessing whether the property is suitable security.

Can you get a home loan for a renovator?

Yes, often.

A normal renovator property can be financeable if it is still habitable and insurable.

Examples of manageable issues may include:

• dated kitchen
• old bathroom
• worn carpets
• peeling paint
• cosmetic damage
• old fixtures
• minor roof repairs
• tired landscaping
• outdated layout
• non-structural repairs

A cosmetic renovator is very different from an uninhabitable property.

What is the difference between cosmetic renovation and major repair?

Cosmetic renovation usually improves appearance and comfort.

Major repair may affect safety, structure or habitability.

Cosmetic renovation may include:

• painting
• flooring
• benchtops
• cabinets
• fixtures
• curtains
• landscaping
• light fittings

Major repair may include:

• roof replacement
• structural works
• re-stumping
• termite damage repairs
• electrical rewiring
• plumbing replacement
• foundation works
• fire damage repair
• mould remediation
• replacing missing kitchen or bathroom

Lenders are usually more cautious with major repairs.

Related research: Can You Get a Construction Loan for Major Renovations or Extensions?

Can you get finance if the house has no kitchen?

Usually, this is difficult.

A normal residential dwelling usually needs a functioning kitchen or cooking facilities.

If the kitchen is missing, stripped out or not functional, the lender may treat the property as incomplete or uninhabitable.

A property without a kitchen may need renovation finance, construction finance, private finance or cash purchase.

Can you get finance if the house has no bathroom?

Usually, this is difficult.

A normal home generally needs a functioning bathroom and sanitation.

If there is no bathroom, no shower, no toilet or no plumbing, the property may not be accepted as a standard residential dwelling.

The lender may require repairs before settlement or decline.

Can you get finance if the house has no toilet?

Usually, no for standard home lending.

A property without approved sanitation may not be considered habitable residential security.

If the property has an old outside toilet, composting toilet, septic issue or incomplete plumbing, the lender may ask for more information.

Can you get finance if the house has no electricity?

Possibly, but it depends why.

A rural off-grid property may be acceptable if it has a reliable approved solar, battery or generator system.

A suburban house with disconnected or unsafe electricity is different.

If there is no power because the house is derelict or unsafe, standard home loan approval may be difficult.

Can you get finance if the house has no water?

Usually, this is difficult unless there is an acceptable alternative supply.

A home needs a reliable water source.

Tank water, bore water or other approved rural supply may be acceptable.

No practical water supply can make the property uninhabitable and difficult to finance.

Can you get finance if the house has no sewer or septic?

Usually, this is difficult.

A dwelling needs an approved wastewater solution.

If there is no mains sewer connection and no approved septic or alternative system, the property may not be acceptable as a home.

The lender may treat it as land or incomplete property.

Can a house with no hot water be financed?

Possibly, but it may indicate the property is incomplete or not fully functional.

The lender or valuer may require hot water to be restored before settlement, especially if other habitability issues exist.

Can a house with no windows or doors be financed?

Usually, this is difficult.

Missing windows, doors or unsecured openings can affect:

• safety
• weatherproofing
• insurance
• valuation
• habitability
• vandalism risk

The lender may require the property to be secured and insured before settlement.

Can a house with roof leaks be financed?

Possibly.

Minor leaks may be manageable.

Major roof leaks can affect structural integrity, mould, electrical safety and insurance.

A lender may be cautious if the valuer or building inspector flags severe roof damage.

Can a house needing a new roof be financed?

Possibly, but it depends on severity.

If the house is still habitable and insurable, the lender may proceed.

If the roof failure makes the property unsafe or uninsurable, the lender may require repairs or decline.

The borrower may need to show funds to complete repairs.

Can a house with structural damage be financed?

Possibly, but major structural damage can be a serious issue.

The lender may request or rely on:

• building inspection
• structural engineer report
• repair quote
• valuation comments
• insurance confirmation
• evidence repairs will be completed

If the structure is unsafe, the lender may not accept it as standard residential security.

Can a house with foundation problems be financed?

Possibly.

Foundation problems can affect value, safety, insurance and resale.

The lender may be cautious if there is:

• subsidence
• stump failure
• major cracking
• movement
• landslip risk
• poor drainage
• expensive repair requirements

A structural report may be needed.

Can a house needing re-stumping be financed?

Possibly.

Re-stumping is common in some older homes.

The lender may consider whether:

• the house is safe
• the cost is known
• the borrower has funds to complete
• insurance is available
• valuation supports the purchase
• the property is habitable now

Major re-stumping needed immediately can reduce lender options.

Can a house with termite damage be financed?

Possibly, but serious termite damage can be a major issue.

The lender may ask or rely on reports to determine:

• whether termites are active
• whether structural timbers are damaged
• repair cost
• treatment required
• whether the property is insurable
• whether value is affected

Minor historical termite damage may be manageable. Severe structural termite damage may stop finance.

Can active termites stop finance?

Possibly.

Active termites may concern the lender if they affect structure or value.

The lender may require treatment, further inspection or repairs before settlement.

Termite issues should be checked before the contract becomes unconditional.

Can a fire-damaged house be financed?

Possibly, but standard home loan approval can be difficult.

A fire-damaged property may need:

• structural assessment
• smoke damage remediation
• electrical certification
• roof or wall repairs
• council approval
• insurance evidence
• repair quotes
• valuation as repaired

If the property is uninhabitable or uninsurable, standard finance may not be available.

Can a flood-damaged house be financed?

Possibly.

Flood damage may affect:

• structural condition
• mould
• electrical safety
• future insurance
• valuation
• flood risk classification
• habitability
• resale demand

A property with past flood damage may still be financeable if repaired and insurable. An unrepaired flood-damaged house is harder.

Can storm-damaged property be financed?

Possibly.

Minor storm damage may be manageable.

Major storm damage affecting roof, walls, windows, structure or services can create insurance and valuation issues.

The lender may need repairs completed or a different loan structure.

Can a house with mould be financed?

Possibly, but severe mould can affect health, habitability and insurance.

The lender may be cautious if mould is linked to leaks, flooding, poor ventilation or structural damp.

A building inspection and remediation quote may be needed.

Can a house with asbestos be financed?

Yes, often.

Asbestos is common in older Australian homes and does not automatically stop finance.

It becomes more serious if asbestos is:

• friable
• damaged
• widespread
• part of planned renovations
• present in fire-damaged areas
• requiring expensive removal
• affecting insurance

The lender may rely on valuation, inspection and insurance.

Can a house with lead paint be financed?

Possibly.

Lead paint may be common in older homes.

It usually becomes a lending issue only if it affects safety, renovation cost, habitability or marketability.

Borrowers should consider inspection and remediation advice.

Can a house with unsafe wiring be financed?

Possibly, but serious electrical issues can affect approval.

Unsafe wiring may affect:

• fire risk
• building insurance
• habitability
• valuation
• settlement conditions

The lender may require repairs or electrical certification if the issue is significant.

Can a house needing rewiring be financed?

Possibly.

If the property is still habitable and insurable, rewiring may be treated as a renovation item.

If wiring is unsafe or insurance is unavailable, the lender may require work completed before settlement.

Can a house with plumbing problems be financed?

Possibly.

Minor plumbing issues may be acceptable.

Major plumbing problems can affect habitability, water damage, sanitation and insurance.

Issues such as no working toilet, failed sewer, leaking pipes or failed septic can be more serious.

Can a house with a failed septic system be financed?

Possibly, but it can be difficult.

If the property is not connected to mains sewer and the septic system has failed, the lender may require repair or replacement before settlement.

A functioning wastewater system is essential for a habitable home.

Can a house with council notices be financed?

Possibly, but council notices can be a serious issue.

Council notices may relate to:

• unsafe structure
• illegal building work
• demolition order
• fire safety
• sanitation
• illegal occupancy
• unapproved additions
• overgrown land
• contaminated site

The lender may require the notice to be resolved before settlement.

Can a demolition order stop finance?

Usually, yes for standard home lending.

If council has ordered demolition, the lender may not treat the dwelling as residential security.

The property may be assessed as land, redevelopment site or specialist security.

A standard home loan may not be suitable.

Can a condemned house be financed?

Usually, not as a standard home loan.

A condemned or unsafe house is unlikely to be acceptable residential security.

The buyer may need cash, land finance, private finance, construction finance or specialist funding.

Can a house with no occupancy certificate be financed?

Possibly.

If the house is old and established, missing modern records may not be a major issue.

If the house is new, owner-built, recently renovated or incomplete, no occupancy certificate can be a serious problem.

The lender may require final approval before settlement or refinance.

Can unapproved renovations affect finance?

Yes.

Unapproved renovations can affect valuation, insurance and lender appetite.

Examples include:

• added bedrooms
• garage conversions
• decks
• bathrooms
• kitchens
• enclosed patios
• attic rooms
• granny flats
• structural changes

The lender may exclude unapproved improvements or require approval evidence.

Can an owner-builder derelict renovation be financed?

Possibly, but lender options are limited.

Owner-builder projects create risk around:

• cost overruns
• incomplete works
• quality
• insurance
• council approval
• valuation
• funds to complete

A major owner-builder renovation of a derelict home may need specialist lending.

Can you buy a derelict house and renovate it with a standard home loan?

Possibly, but only if the property is acceptable at purchase.

A standard home loan may fund the purchase, while the borrower funds renovation separately.

This may work if the property is habitable and insurable.

If the property is uninhabitable, the lender may not approve a standard home loan.

Can renovation costs be included in a home loan?

Possibly.

Some lenders allow funds for renovation, but it depends on the renovation size and structure.

Small cosmetic renovations may be funded by cash-out, personal funds or equity release.

Major structural renovations may require a construction or renovation loan.

The lender may ask for quotes, plans, approvals and valuation as complete.

Can a construction loan be used for a derelict house?

Possibly.

If the renovation is major, the lender may treat it like construction.

They may require:

• building contract
• approved plans
• scope of works
• builder licence
• fixed-price quote
• valuation as if complete
• funds-to-complete evidence
• insurance
• council approval

Construction-style finance may be more appropriate than a standard purchase loan.

Related research: Can You Get a Construction Loan to Build a House in Australia?

Can you get a loan to knock down and rebuild?

Possibly.

If the plan is to demolish the derelict house and build new, a knockdown rebuild construction loan may be suitable.

The lender will assess:

• current property purchase or ownership
• demolition cost
• building contract
• council approval
• valuation as complete
• funds to complete
• temporary accommodation costs
• construction timeline

The existing derelict dwelling may not add much security value.

Can the lender treat the property as vacant land?

Yes.

If the house is uninhabitable, unsafe or scheduled for demolition, the lender may value the property mainly as land.

This can reduce the loan amount because vacant land lending may have different LVR limits.

A buyer expecting normal house lending may face a shortfall.

Can land value only cause a finance shortfall?

Yes.

For example, a property may sell for $650,000 because buyers see renovation potential.

If the lender values it mainly as land at $520,000, the loan amount may be much lower than expected.

The borrower may need a larger deposit or different finance structure.

Can a valuation come in lower because the house is derelict?

Yes.

The valuer may reduce value for:

• poor condition
• repair costs
• safety issues
• insurance risk
• lack of habitability
• limited buyer market
• demolition cost
• incomplete approvals
• land-only value
• unknown defects

The valuation can be much lower than the contract price.

Can a valuer require repairs before settlement?

The valuer may recommend conditions or note risks.

The lender may then require:

• repairs before settlement
• evidence of insurance
• further reports
• lower loan amount
• lower LVR
• construction loan structure
• decline

Valuation comments can be decisive.

Can a building inspection affect the lender?

Possibly.

The lender may not always request the buyer’s building inspection, but if serious issues are disclosed or identified, they may ask for more information.

If the valuer notes condition issues, the lender may request reports.

Borrowers should not hide known material property issues.

Can a lender require a structural report?

Yes, if structural concerns are identified.

A structural report may be needed for:

• major cracking
• subsidence
• termite damage
• roof sagging
• fire damage
• storm damage
• re-stumping
• retaining wall issues
• unsafe decks

The lender may rely on the report to decide whether the property is acceptable.

Can a lender require repair quotes?

Possibly.

If repairs are needed for habitability or value, the lender may ask for quotes and funds-to-complete evidence.

Repair quotes help show whether the borrower can afford to restore the property.

Without a clear repair budget, the lender may worry the property will remain incomplete.

Can the borrower’s savings help approval?

Yes.

Borrower savings can help if they show funds are available to complete repairs.

However, savings do not fix every issue.

If the property is uninsurable or unacceptable security, having repair funds may not be enough unless the lender accepts the plan.

Can a large deposit help finance a derelict house?

Yes, sometimes.

A larger deposit reduces lender risk and may help if the property is marginal but acceptable.

It may not help where:

• the property cannot be insured
• the house is condemned
• there is no legal occupancy
• no sanitation exists
• council has ordered demolition
• the dwelling is unsafe
• the lender does not accept the security

A large deposit helps with numbers, not fundamental property acceptability.

Can strong income overcome property condition issues?

No, not by itself.

Strong income helps serviceability.

Property condition is a security issue.

A lender may decline a property even if the borrower can easily afford repayments.

Can a guarantor help buy a derelict house?

Possibly, but it depends on the issue.

A guarantor may help with deposit or LVR, but they may not make unacceptable security acceptable.

If the derelict property is not acceptable, the lender may still decline.

Additional security may help in some cases, but it adds risk.

Can additional security help?

Possibly.

If the borrower offers another acceptable property as security, the lender may have more comfort.

This may help fund renovation or purchase.

However, cross-collateralisation can be risky and may make future refinance or sale harder.

A broker should compare separate loan structures first.

Can private finance help buy a derelict house?

Possibly.

Private lenders may consider derelict or uninhabitable properties at low LVR with a clear exit strategy.

This can be useful where the buyer plans to repair and refinance.

However, private finance usually has higher rates, fees and shorter loan terms.

The exit strategy must be realistic.

Can buying with cash and refinancing later work?

Possibly.

A buyer may purchase a derelict house with cash, complete repairs, obtain insurance and refinance later.

This can work if the completed property becomes acceptable security.

The risk is that repair costs blow out, approval issues emerge or valuation is lower than expected.

Can a specialist lender help?

Possibly.

Specialist lenders may be more flexible with unusual property or credit scenarios.

They may consider:

• lower LVR
• clear repair plan
• strong exit strategy
• insurance evidence
• valuation support
• borrower experience

However, they still need acceptable security.

Can a derelict house qualify for first home buyer schemes?

Possibly, but it may be difficult.

First home buyer schemes usually require eligible residential property.

If the property is uninhabitable or not acceptable to the lender, the scheme may not help.

Low-deposit schemes are generally much harder with damaged or non-standard property.

Can a derelict house qualify for the First Home Guarantee?

Possibly, but only if the property meets scheme and lender rules.

If the lender will not accept the property as residential security, the guarantee does not solve that.

A property needing major repairs may not suit low-deposit lending.

Can a derelict house qualify for the First Home Owner Grant?

Usually, the grant is more relevant to new homes or substantial new builds, depending on state rules.

A derelict established house may not qualify unless it is part of a qualifying new build or major construction scenario.

Grant rules should be checked separately.

Can stamp duty concessions apply?

Possibly.

Stamp duty concessions are state-specific and depend on property type, value, use and buyer eligibility.

A derelict house may still be an established home for duty purposes, but legal advice should be obtained.

Can an uninhabitable house be rented out?

Usually, no if it is unsafe or not lawful to occupy.

From a lending perspective, rental income may not be accepted if the property is not habitable.

A lender may require the property to be repaired before relying on rental income.

Can projected rent after renovation be used?

Possibly, but it is more difficult.

Some lenders may use a rental appraisal based on completed condition for renovation or construction finance.

Others may only use current rent or no rent until repairs are complete.

If the borrower needs future rent to service the loan, lender options may reduce.

Can Airbnb income be used after renovating a derelict property?

Possibly, but usually only after there is income history or clear lender policy.

Projected Airbnb income is often assessed conservatively.

The property must also be approved, insured and suitable for short-stay use.

Can a derelict property be bought as an investment?

Possibly.

If the property is uninhabitable, rental income may not be available immediately.

The lender may assess the borrower’s ability to hold the property during repairs.

They may ask for repair budget, timeline, funds and post-renovation rental evidence.

Can holding costs affect approval?

Yes.

Renovating a derelict property can involve holding costs such as:

• loan repayments
• rent elsewhere
• council rates
• insurance
• utilities
• builder deposits
• repair costs
• contingency
• permits
• temporary fencing
• security
• demolition costs

The lender may assess whether the borrower can afford these costs.

Can a derelict house be insured during renovation?

Possibly.

The borrower may need renovation insurance, construction insurance, vacant property insurance or specialist cover.

Standard home insurance may not cover a vacant, derelict or under-renovation property.

Insurance should be checked before settlement.

Can no insurance stop the loan?

Yes.

If acceptable insurance cannot be obtained, a standard lender may not settle.

This is common with severely damaged, vacant, incomplete or unsafe properties.

Insurance can be the deciding factor.

Can a lender require insurance before settlement?

Yes.

Most lenders require building insurance before settlement, unless the property is strata and covered by body corporate insurance.

A derelict property can be hard because the insurer may not issue normal building insurance.

Can a lender accept vacant property insurance?

Possibly.

It depends on lender policy and the policy terms.

If the property is vacant but habitable, vacant property insurance may be accepted.

If it is derelict or uninhabitable, specialist cover may be required and some lenders may still decline.

Can a lender accept construction insurance?

Possibly.

For major renovations or knockdown rebuilds, construction insurance may be required.

The lender may need evidence that the property and works are insured during the project.

Can a property be too risky to insure?

Yes.

A property may be uninsurable if it has:

• severe structural damage
• fire damage
• flood exposure
• storm damage
• no roof
• unsafe wiring
• vacant derelict condition
• illegal building works
• no occupancy approval
• demolition order
• high bushfire risk

If no insurer will cover it, finance options may be limited.

Can council approval be needed for repairs?

Yes.

Repairs may require approval if they involve:

• structural changes
• extensions
• roof replacement
• plumbing
• electrical work
• major renovations
• demolition
• rebuilding
• heritage property
• bushfire or flood compliance

The lender may need approvals before funding major works.

Can heritage restrictions affect derelict property finance?

Yes.

A derelict heritage property may be expensive to repair and difficult to insure.

Restrictions may limit demolition, materials, design and renovation methods.

The lender may be cautious because repair costs and marketability can be uncertain.

Can a property be too damaged to renovate?

Possibly.

A building inspector or engineer may determine demolition is more realistic than repair.

If the borrower is planning to renovate but the lender sees demolition risk, the loan structure may change.

A knockdown rebuild loan may be more suitable.

Can demolition costs affect finance?

Yes.

If the house needs demolition, the cost should be included in the borrower’s budget.

Demolition may include:

• asbestos removal
• permits
• disconnection of services
• site clearing
• waste disposal
• temporary fencing
• erosion control
• tree protection

If demolition is required and not budgeted, the lender may question funds to complete.

Can a derelict house on valuable land be financed?

Possibly.

If land value is strong and LVR is low, some lenders may be more comfortable.

However, the property may still be treated as land, development site or renovation security.

A standard home loan may not be available if the dwelling is not acceptable.

Can development potential help?

Possibly, but lenders usually focus on current value and current security.

Future development potential may not support a standard home loan unless reflected in the valuation and acceptable to the lender.

If the borrower plans to redevelop, development or construction finance may be needed.

Can the lender require the property to be habitable at settlement?

Often, yes for a standard home loan.

Some lenders may accept minor defects, but they generally want the property to be suitable residential security.

If the property cannot be occupied safely, the lender may require a different structure.

Can the lender require repairs before settlement?

Possibly.

A lender may require repairs before settlement where the issue affects:

• safety
• insurance
• valuation
• habitability
• security
• compliance

However, repairs before settlement can be difficult if the buyer does not yet own the property.

The seller may need to complete them, or the contract may need special conditions.

Can the seller complete repairs before settlement?

Possibly.

This may help if the seller agrees and the repairs are simple.

However, major repairs can take time and may require approvals.

The buyer should not rely on repair promises without solicitor advice and lender confirmation.

Can settlement retention help?

Sometimes.

A buyer and seller may agree to hold back funds for repairs after settlement.

However, the lender may still decline if the property is not acceptable security at settlement.

A retention agreement does not automatically satisfy lender requirements.

Can a lender provide a repair holdback?

Sometimes, but it is lender-specific.

Some lenders may allow minor works to be completed after settlement under controlled conditions.

Major habitability issues are less likely to be accepted.

Many lenders prefer the property to be acceptable before settlement.

Can a personal loan be used for repairs?

Possibly.

A borrower may use a personal loan for repairs, but this increases debt and can reduce borrowing capacity.

The lender may include the personal loan repayment in serviceability.

For major renovations, a construction or renovation loan may be more suitable.

Can credit cards be used for repairs?

Technically possible, but risky.

Credit card limits and repayments can reduce borrowing capacity.

High-interest debt can also create financial stress during renovation.

Lenders may not like seeing repair funding dependent on unsecured debt.

Can family funds be used for repairs?

Possibly.

Family help may assist with repair costs, but lenders may ask whether funds are gifted or borrowed.

Borrowed family funds can affect serviceability.

Gifted funds may need a gift letter and evidence of transfer.

Can you refinance after repairs are complete?

Possibly.

Once the property is repaired, insured and habitable, refinance options may improve.

The lender may order a new valuation based on completed condition.

Approval depends on:

• final value
• LVR
• income
• insurance
• council approvals
• property condition
• lender policy

A successful refinance is not guaranteed, so the exit should be checked early.

Can a lender use the after-renovation value?

Possibly, but usually only under construction or renovation finance.

For a standard purchase, the lender may use the current “as is” value.

If the borrower wants to borrow based on future value, the lender may need a formal renovation or construction structure.

Can an “as is” valuation be different from “as complete” valuation?

Yes.

An “as is” valuation reflects current condition.

An “as complete” valuation reflects the property after approved works are complete.

For derelict homes, the difference can be significant.

The lender will choose the valuation basis according to the loan type.

Can a derelict property be financed at 80% LVR?

Possibly, but it depends on condition.

A habitable renovator may be approved at 80% LVR.

An uninhabitable or uninsured property may not be approved even at 80%.

If the lender treats the property as land or renovation security, LVR limits may differ.

Can a derelict property be financed above 80% LVR?

This is difficult.

High-LVR lending usually requires standard, marketable, insurable residential property.

Mortgage insurers may be cautious with damaged or uninhabitable homes.

A larger deposit is often needed for serious renovator properties.

Can a derelict property be financed below 80% LVR?

Often, options improve.

A lower LVR can help if the property is unusual but still acceptable.

It does not fix fundamental issues such as no insurance, unsafe structure, no sanitation or demolition orders.

Can a lender require the borrower to have renovation experience?

Possibly.

For major renovation, construction or development-style projects, a lender may consider whether the borrower can manage the works.

This is more likely with owner-builder projects, large structural renovations or private finance.

For a normal cosmetic renovator, experience may not matter.

Can a derelict house be financed in a company or trust?

Possibly.

Entity borrowing adds another layer.

The lender may review:

• borrower structure
• guarantees
• loan purpose
• renovation plan
• property condition
• income evidence
• trust deed or company documents
• tax advice

Non-standard borrower plus non-standard property can reduce lender options.

Can SMSF lending be used for a derelict property?

Possibly, but it is highly specialised.

SMSF property rules can be strict, especially around improvements, borrowing, related parties and renovation works.

A derelict property in an SMSF should be reviewed by an SMSF lending specialist, accountant and solicitor before proceeding.

What documents may be required?

Documents may include:

• contract of sale
• valuation
• building insurance certificate
• building inspection report
• pest inspection report
• structural engineer report
• repair quotes
• scope of works
• builder contract
• council approval
• occupancy certificate
• electrical report
• plumbing report
• asbestos report
• termite treatment report
• demolition quote
• funds-to-complete evidence
• construction insurance
• renovation insurance
• rental appraisal after repairs
• photos or condition report

The document list depends on the severity of the issues.

What should a property condition explanation include?

A strong explanation should cover:

• current condition
• whether the property is habitable
• whether it can be insured
• what repairs are needed
• repair cost estimate
• who will complete the repairs
• whether approvals are required
• whether the borrower has funds to complete
• whether the property will be owner-occupied or investment
• expected value after repairs
• whether the dwelling will be retained or demolished

This helps the lender understand whether the risk is manageable.

What should your broker check?

Your broker should check:

• whether the lender accepts the current property condition
• whether insurance is required before settlement
• whether a standard home loan is possible
• whether renovation or construction finance is needed
• whether LVR will be reduced
• whether mortgage insurance is available
• whether valuation should be “as is” or “as complete”
• whether repair funds must be verified
• whether private or specialist lending is needed

A broker should check lender appetite before the buyer signs an unconditional contract.

What should your solicitor check?

Your solicitor or conveyancer should check:

• contract conditions
• disclosure of defects
• council notices
• occupancy approval
• unapproved works
• demolition orders
• heritage restrictions
• insurance risk
• settlement obligations
• seller repair obligations
• buyer termination rights

Legal protection is important when property condition is uncertain.

What should your building inspector check?

A building inspector should check:

• roof condition
• structural movement
• stumps and foundations
• moisture
• mould
• termite damage
• electrical safety
• plumbing
• drainage
• decks and stairs
• asbestos risk
• habitability
• safety issues

For severe issues, specialist reports may be needed.

What should your insurer check?

Your insurer should confirm:

• whether the property can be insured now
• whether vacant property conditions apply
• whether renovation cover is needed
• whether construction insurance is required
• whether fire, storm, flood or bushfire cover applies
• whether unapproved works are excluded
• whether the insured amount is acceptable
• whether lender interest can be noted

Insurance should be checked before the contract becomes unconditional.

Common mistakes with derelict house finance

Do not assume cheap property is easy to finance.

Do not assume an old house is the same as a derelict house.

Do not assume a large deposit fixes no insurance.

Do not ignore building and pest reports.

Do not rely on renovation estimates without quotes.

Do not assume the lender will lend on after-renovation value.

Do not assume the valuer will match the contract price.

Do not assume the house adds value if it needs demolition.

Do not sign unconditional before checking lender appetite.

Do not use private finance without a realistic exit plan.

How to improve your chances of approval

You can improve your chances by reducing uncertainty.

Helpful steps include:

• confirm the property can be insured
• obtain building and pest reports
• get structural reports where needed
• obtain repair quotes
• confirm council approval status
• check for notices or orders
• keep LVR conservative
• show funds to complete repairs
• choose the right loan structure
• avoid relying on projected rent too heavily
• use a lender comfortable with renovation property
• get solicitor advice before signing

The more clearly the property can be repaired, insured and valued, the easier the lender assessment becomes.

Should you wait before applying?

Sometimes.

Waiting may help if:

• insurance has not been confirmed
• building reports are pending
• repair quotes are missing
• council notices need review
• structural condition is unknown
• the valuation basis is unclear
• the lender may require repairs first
• the loan structure may need to change

You may not need to wait if:

• the property is habitable
• insurance is available
• repairs are cosmetic
• valuation supports the price
• LVR is conservative
• lender appetite is confirmed

A broker can help decide whether the property is finance-ready.

Example scenarios

Scenario 1: Cosmetic renovator

A borrower buys an older home with dated interiors but working kitchen, bathroom, services and insurance.

The lender treats it as a normal residential purchase.

Scenario 2: House with no kitchen

A property has been stripped for renovation and has no functioning kitchen.

The lender treats it as incomplete and may decline a standard home loan.

Scenario 3: Termite-damaged house

A building report identifies major termite damage to structural timbers.

The lender requests further reports and repair quotes before deciding whether to proceed.

Scenario 4: Fire-damaged house

A borrower wants to buy a fire-damaged property at a discount.

The lender requires insurance and valuation support, but standard finance may not be available until repairs are complete.

Scenario 5: Land value only

A property has a derelict dwelling that needs demolition.

The valuer treats the property mainly as land, reducing the available loan amount.

Scenario 6: Cash purchase then refinance

A buyer pays cash for an uninhabitable house, completes repairs, obtains insurance and refinances once the property is habitable.

So, can you get a home loan for an old or derelict house?

Yes, if the property is still acceptable residential security.

The strongest applications usually involve:

• older but habitable home
• working kitchen and bathroom
• connected services
• building insurance available
• no major structural defects
• no council orders
• satisfactory valuation
• clear repair plan
• conservative LVR
• lender policy that accepts the property

The weakest applications usually involve:

• uninhabitable house
• no kitchen or bathroom
• unsafe structure
• no insurance
• major termite or fire damage
• demolition order
• failed services
• no occupancy approval
• valuation as land only
• high LVR
• relying on future renovation value without the right loan structure

An old home can be easy to finance. A derelict home can require a very different strategy.

Need help financing an old, damaged or derelict house?

A mortgage broker can help compare lenders for renovator properties, derelict houses, damaged homes, uninhabitable dwellings, knockdown rebuilds, construction loans, renovation finance, refinance, equity release and private finance exits.

We can review the property condition, insurance position, valuation risk, repair budget, LVR, loan structure, income position and lender options before you apply.

If you are buying a property that needs major repairs, speak with a mortgage broker before assuming a standard home loan will work.