Most homes are built with traditional materials such as brick, mortar or fibro.

These types of properties are more readily-accepted by banks but a select few lenders will accept properties made with unconventional building materials such as mud-brick, straw-bale or even rammed earth.

If you want to build a unique property, discover how to get a home loan.

Unconventional building materials as the banks see it

As far as the banks are concerned, all building materials aside from brick, weatherboard or fibrous cement are unconventional building materials.

This includes:

  • Timber
  • Straw-bale
  • Mudbrick

Homes that use these materials include rammed earth construction, dugout homes, salvaged material homes and gypsy wagon houses.

Properties built using unconventional building materials may not look that different from standard properties.

Even if there is a visible difference, location plays a big part in terms of the property’s marketability.

Therefore, if you want to maximise your property’s future capital growth and sellability, make sure you build or buy in larger regional centres where there’s demand for such a type of property.

This will also help ensure you can get a loan to buy it because the banks take your property’s marketability into consideration when assessing your loan application.

How much can I borrow?

In most cases, you can borrow up to 80% Loan to Value Ratio (LVR) to buy unconventional homes.

If a lender can accept the property as any other established dwelling then you may be able to borrow up to 95% LVR. However, this depends mainly on how marketable the property is.

For example, lenders may be able to lend up to 95% for an unconventional home that’s very close to a standard house and has a wide appeal to most buyers.

Properties with an unusual design or if it has certain problems or limitation are generally harder to sell. If you’re buying or building such a property, most banks will require you to have a large deposit.

We have mortgage brokers with many years of experience in the credit industry. We know which lenders are more flexible with their lending policy and we can help you qualify for a home loan.

You can discuss your situation and loan needs with one of our expert mortgage brokers by calling us on 1300 889 743. You can also fill in our free online assessment form and one of us will contact you instead.

Why are the banks so conservative?

While eco-friendly houses made of mudbrick or straw bale are becoming more popular, from the bank’s point of view, these properties are still harder to sell compared to the bread and butter type homes.

The reason is simple: unconventional homes don’t appeal to every buyer. Such properties can take longer to sell because the market for eco-friendly homes, while growing, is still very limited at moment.

This is why lenders generally lend only up to 80% LVR.

It’s also worth noting that lenders may be more conservative with their lending policy if you’re building rather than simply buying a property made of unconventional building materials.

Another reason why the banks are conservative is that most of these properties are considered higher risk compared to a conventional home.

Lenders usually require that properties with a higher risk rating be approved by higher level credit assessors. Unless you have a strong loan application such as having other property to use as security, a strong income and a low LVR, you may not qualify.

Can I still get a no deposit construction loan?

Unfortunately, there are no longer any lenders in Australia that offer no deposit construction loans.

However, if you want to take out a no deposit home loan or construction loan, you can go guarantor instead.

Please note that most lenders will only allow a guarantee from your parents. If your guarantor is someone other than your parents, you may have to meet additional lending criteria.

With a guarantor home loan, you can avoid the requirement for a deposit as well as genuine savings. You’ll also avoid having to pay Lenders Mortgage Insurance (LMI). Lenders generally charge LMI when you borrow more than 80% LVR.

What are the alternative loan products?

It’s generally easier to secure finance when you’re buying an established property rather than building a property using unconventional building materials. If you don’t qualify for a standard construction loan, you can apply for the following instead:

  • Cost plus construction home loan: You can borrow up to 80% LVR with a cost plus construction home loan. Here, large scale renovations of existing properties are also generally accepted. Note that you’ll need to have contingency funds in case you exceed your budget. However, most banks don’t lend to cost plus building contracts.
  • Owner builder loan: If you’re a licenced builder, you may be able to borrow up to 95% LVR with an owner builder loan. If not, you’re generally limited to 80% LVR.

Most banks heavily rely on the valuer’s reports when it comes to financing unconventional homes. This is where marketability, zoning, surrounding properties, risk rating and other factors come into play. Some banks assess these properties case by case while others may not accept them.

  • Bailey

    Okay so no deposit construction loans are not available but what about no deposit loans for renovations? Are they available?

  • Hello Bailey,

    Yes, no deposit loans are available for renovations and you can borrow 100% of the cost of the renovation or addition to an existing house. If you already own the house then this is possible if you’re not carrying out significant renos or rebuilding, although some lenders may restrict you to 95% of the current house value plus cost of renos. If you’re buying and you have a building contract in place to commence renos immediately then this is more favourable and you may be able to borrow 100% of the house plus the building contract.

  • Ronda

    Hi, can I borrow 100% of the value of vacant land? I could be building using unconventional materials later on, not confimed though.

  • You can borrow up to 100% of the purchase price with the help of a guarantor but this will be with select lenders only. Please feel free to contact us if you’d like to discuss it with an expert guarantor loan specialist.

  • Mick1e

    My sister had mentioned to me that it would be best to provide quotes for any additional works to be done on the property. Will you please give me some examples of this?

  • Hi Mick1e,
    Yes, that’s true. Not everything will be included in the construction so it’s important to provide quotes additional works upfront. Some of these additional works include:
    – Swimming pools,
    – Sheds,
    – Landscaping and retaining walls,
    – Power poles,
    – Driveways, etc.

    If you provide quotes, you can borrow to finance these additional costs. If you don’t, you’ll likely need to fund these costs yourself. Do be careful as some lenders will only release money for the additional work once the main house is completed. This may not suit your construction schedule so, in some cases, we may need to switch lenders.