What do banks think?
Sick of the rat race? Want to move out of the city but don’t have enough for a house?
With a liveable shed loan, you can buy a shed house or “shouse” at a fraction of the price of a standard bricks and mortar home.
Not all liveable sheds are the same though, so if it has limited marketability, banks can be conservative in how much you can borrow.
How much can I borrow?
Liveable sheds are viewed as a unique property type because they tend to have a limited market of buyers.
If the frame and cladding are council-approved, and the inside of the property is a standard design and uses otherwise standard building materials, you may qualify for the following:
- You can borrow up to 90% of the property value or up to 80% of the land value.
- Council-approved: The property must be approved as a Class 1a structure (inhabitable dwelling) by the local council.
- Land size up to 10 to 50 ha: Borrow up to 90% of the property value.
- Land size up to 60 ha: You can borrow up to 80% of the property value.
- Land size up to 100 ha: You can borrow up to 70% – 80% of the property value on a case by case basis.
- Land size over 100 ha: Land at this size may be classed as a commercial farm but you can avoid higher interest rates if you can show evidence that the land isn’t “income-producing”.
- Guarantor: If your parents or a relative can act as guarantor on your mortgage, you can potentially borrow up to 105% of the property value.
- Discounts: Competitive professional package and basic loan interest rate discounts are available for blocks that are up to 100 ha in size.
Please call us on 1300 889 743 or complete this free assessment form to speak with one of our liveable shed loan specialists.
The property must be council-approved
The shed must be built to specific Class 1a (inhabitable space) building specifications.
Despite your intended use, sheds, steel lodges or barn dwellings are usually classed as Class 10a, which falls under the categoryof garages and carports.
Each council is different so speak to your local building certifier to confirm any building regulations you have to adhere to.
In order to be classified safe to live in, the foundation design must meet the criteria of the Building Code of Australia.
The liveable shed also needs to have:
- Proper insulation.
- Connection to water.
- Connection to sewerage or a septic tank.
- Connection to the power grid.
- Good ventilation.
- A vapour barrier for the concrete slab.
- Minimum ceiling height requirements.
Even if you’re buying an existing shouse, it’s still good to check with council that the property is certified Class 1a.
It may be that the previous owner built the shed themselves without approval so you could face massive fines or you may be forced to rebuild the property to meet local council rules.
Worse still, you won’t be able to get approved for a liveable shed loan until the property meets local building codes.
What can affect my liveable shed loan application?
Other reasons your application could be declined is in the following circumstances:
It’s best to speak to us instead of going to a bank directly and getting knocked back for a mortgage.
We’re specialists liveable sheds and other unique property types and lender choice is the key to approval.
What else should I consider about the property?
You should find out whether the framing and steel sheets meet national safety codes including:
- Snow loading.
- Cyclonic rating.
- Earthquake loading.
Can I get a construction loan to build a liveable shed?
Liveable sheds are typically bought as kit homes.
A company, such as Ranbuild, manufactures the frame and sheeting for the property based on your specifications.
You’ll then work with builders and designers to turn the shed into a liveable home.
Shed house manufacturers usually want to be paid in full before the shed leaves their factory.
If you’re using a licensed builder, then we may be able to help you qualify for a construction loan.
However, when you consider the costs of using a builder, you’ll probably spend the same amount as buying an existing bricks and mortar property!
If you’ve built up substantial equity in land or another residential property that you own, then we may be able to help you with finance.
Does location matter?
Most lenders prefer properties that are located near metro hubs or major regional towns.
This, again, comes down to the marketability of the property.
In the event you default on your liveable shed loan, the bank would need to quickly sell the property to recoup their losses.
Rural locations have a much smaller market for potential buyers. To get a better idea of where you stand, try the postcode restrictions calculator.
We know of a couple of lenders that are more flexible when it comes to location!
Give us a call on 1300 889 743 or complete our free assessment form to speak with one of our mortgage brokers about the property.
Be careful of zoning!
Some lenders take the zoning of your property into account and others don’t.
It can make a huge difference in getting approved for a liveable shed loan.
The most common zoning types are listed below.
QLD and WA rural property zoning
Unlike New South Wales and Victoria, zoning in Queensland and Western Australia differs from council to council.
In this case, it’s better to contact your specific council and ask them what the land can be used for and what the limitations are.
You can then contact us so we can let you know if we can help you.
NSW rural property zoning
- General Residential (R1): Small properties often under 2 hectares that are next to regional centres. Normally acceptable.
- Rural Landscape (RU2) NSW: A flexible zoning that allows many agricultural, tourism and residential housing uses. The land size and usage will determine how you can borrow.
- Large Lot Residential NSW (R5): Typically residential housing in a rural location. Normally acceptable to our lenders.
- Rural Residential Zone NSW: This zone has been replaced by ‘Large Lot Residential’ but many properties are still in the old zone. This can also be broken down to ‘rural fringe’ and ‘rural living’. This is normally acceptable for lending purposes.
- Rural Small Holdings NSW: This typically refers to hobby farms and lifestyle properties in rural areas. Normally, properties in this zone are acceptable to our lenders.
- Primary Production NSW: Typically used for extensive agriculture rather than intensive agriculture. The land size and usage will determine how much we can lend whether you may need a farm loan instead.
VIC rural property zoning
- Rural Living Zone (RLZ) VIC: Usually used for residential purposes with minor agricultural activities.
- Rural Conservation Zone (RCZ) VIC: Rural areas of environmental importance. A single house can be built, typically acceptable for lending purposes.
- Rural Activity Zone (RAZ) VIC: A flexible zoning that allows agricultural, residential, tourism and business use. The usage of the property will determine how much we can lend.
- Farming Zone VIC: Sometimes these are hobby farms and other times commercial farms. The land size and usage will determine how much we can lend.
All other states
All hobby farms in the ACT are acceptable with at least one of our lenders. For shed houses in SA, NT and TAS, please complete our online enquiry form to find out if we can help you.
What is a liveable shed?
Shed houses or shouses start off as a slab and a house frame using cheaper materials like galvanized iron, ZINCALUME® brand coated steel and COLORBOND® brand coated pre-painted steel.
Typically, the company that manufactures the shed will include internal walls ready to plasterboard and frames that are ready for electrical wiring and plumbing.
Again, make sure that the buildings design and materials are certified under Australian Standards and the national building code.
After that, you can employ a builder to complete the rest of the construction.
Who buys shed houses?
Many people choose to move out to rural and country to shift gears, particularly if they’re near retirement.
It’s not uncommon for people to raise a few farm animals and grow their own food as a hobby farm.
Others buy a liveable shed as a holiday home, enjoying the escape with their family a couple of times a year and then renting it out to other holiday-goers for the rest of the year.
If this is your intention, providing the bank with a 12-month rental income letter from an authorised real estate agent or property manager will give you a better chance of getting approved.
The rental letter provides an estimate of rent over a 12-month period.
If you’re relying on proposed rental income (rental reliant) to qualify for a home loan then this can have a serious impact on your borrowing power.
That’s because off-peak periods for holiday homes can be for more than 6 months, depending on the location.
This can make it difficult to find tenants or even buyers for the property. This is the reason that banks can sometimes take a conservative approach to holiday homes.
Do you need a liveable shed loan?
Tell us about the shed house you’re looking to buy by calling us on 1300 889 743 or by completing our free assessment form today.