Borrowing against a property that's mid-renovation: how it's valued and what it can fund

A property that’s halfway through a renovation sits in an awkward place for lenders. It’s worth more than it was, and it will be worth more again when the work is done, but today it might have no kitchen, an open roof or a pile of scaffolding where the front door should be. If you own it and need funding for your business now, the question is simple: will anyone lend against it as it stands?

Often, yes. But the way it’s valued, and the way the loan is structured, differ from a finished property, and the differences decide how much you can borrow and how fast.

What does “as is” versus “as if complete” mean?

Valuers use two bases when work is under way.

• As is: what the property is worth today, in its current condition, with the work partly done or not started.
• As if complete: what the property is expected to be worth once the planned work is finished to the described standard. Valuers describe this as an estimate of the finished value, including for property not yet built (Opteon).

For a short-term, property-backed business loan, the lender normally sizes the loan on the as is figure. The as-if-complete figure is useful context: it shows the lender that the project is sensible and that the property should be worth more at the end. It isn’t the number you borrow against on day one.

That’s the first thing to get straight, because owners often work out their equity from the finished value and are surprised when the lender’s number is lower. The property equity checker lets you test your borrowing at the as-is value rather than the dream value.

How does the unfinished state change the valuation?

A valuer inspecting a mid-renovation property is asking whether it could be sold today, to a buyer, within a reasonable time. The answer depends on what’s been done.

State of the property	Typical effect on the as-is value
Cosmetic work under way, property still usable	Small effect; valued close to normal
Kitchen or bathroom stripped out, rest sound	Noticeable discount for the cost of finishing
Structural work open (roof off, walls removed)	Large discount; some lenders won’t proceed
Work done without required approval	May be valued as though it isn’t there
Stalled project, no builder engaged	Treated cautiously; lender wants a plan

Our guide to what a valuer checks on a quick property loan covers desktop, kerbside and full valuations. For an unfinished property a desktop valuation is rarely enough, because the valuer can’t see inside. Expect a full inspection, and allow for it in the timing.

What does a lender want to see before it will lend?

A lender can only price a half-finished property if it can see where the project is going. A tidy pack helps a decision come quickly.

1. The scope of works: what’s being done, in plain terms.
2. Quotes or a signed building contract, showing the cost to finish and who’s doing it.
3. Approvals, where they’re required: development approval, a construction certificate or equivalent for your state.
4. The builder’s licence details, or the owner-builder permit if you’re supervising the work.
5. Insurance, covered below.
6. A timeline with dates for completion and the revaluation.
7. The exit: how the loan will be repaid.

The approvals point matters. Work done without sign-off can be valued at nil, and our guide to unapproved building work on loan security explains how a council certificate can fix it and what that costs in time.

If you’re running the work yourself, note the rule in NSW: you need an owner-builder permit to supervise or do work worth more than $10,000 on your own home without a licensed builder (NSW Government). Other states have their own thresholds, and a lender will ask which applies.

Not sure whether your pack is ready? You can tell us where the work is up to and we’ll say which pieces matter for your property.

Is the property insured while it’s being renovated?

This is the step owners skip, and lenders don’t. A lender taking a mortgage over a property wants it insured, and a standard home policy may not respond when work is under way.

One large insurer’s published position is that it doesn’t cover loss, damage or legal liability during renovations or building works, and lists exclusions including damage from cracking, collapse or subsidence caused by the works, and water entering through openings even when they’re temporarily covered. It also says it doesn’t cover legal liability for building works over $50,000 (GIO). Other insurers differ, which is the point: there’s no standard answer.

The practical sequence:

• Tell your insurer before the work starts, and get the answer in writing.
• Ask whether your builder carries contract works cover, and whether it protects the existing structure or only the new work.
• If your policy won’t respond, arrange cover that does before the loan settles.

Doing this before you apply removes a condition that would otherwise land at the end of the process and slow it down.

What can the loan be used for?

This site arranges business loans, so the money must be for a business purpose. That fits a number of renovation situations:

• Business premises you own: a shop, clinic, workshop or office being fitted out or repaired, where you need working capital while the space is out of action.
• A property you’re improving to sell or lease, where the proceeds will repay the loan.
• A business need unrelated to the works, such as stock, wages or a tax payment, funded against equity in a property that happens to be mid-renovation.

In the last case the renovation is just a feature of the security. That’s often the simplest version, because the lender only has to be comfortable that the property is worth what it says today and that the work will be completed.

The exit: finish, revalue, then refinance or sell

Short-term property lenders approve on the exit, and a renovation gives a natural one. The path usually looks like this:

1. Finish the work to the standard in the scope.
2. Get the final approvals or certificates.
3. Have the property revalued at its new, completed value.
4. Refinance to a longer-term lender or sell, and repay the short-term loan.

Each step has a date that can slip: builders run over, councils take weeks to issue certificates, valuers need access. That’s why the planning the exit guide recommends building in a buffer of at least two to three months. For a renovation, we’d lean to the longer end.

There’s also a risk to be honest about. The finished value is an estimate. If the market softens, or the finished property comes in below what was expected, the revaluation may be lower than the plan assumed, and the refinance may be smaller than the loan you need to repay. Using property as security means that if the loan can’t be repaid, the lender can ultimately sell the property. Get independent legal advice before you sign, and don’t borrow against a property you can’t afford to put at risk.

An illustrative example

A Newcastle café owner holds a freehold shop with a flat above it. They’re renovating the flat to lease it out, and the work is about half complete. The shop and flat were valued at $1.1m before work began, with $350,000 owing on a first mortgage. The owner needs $120,000 for business working capital over six months.

The lender’s valuer inspects and values the property as is at $1.0m, taking account of the stripped-out flat. The as-if-complete figure is $1.2m. At a combined 60% limit on the as-is value, the maximum total debt is $600,000, so there’s $250,000 of room after the existing mortgage, comfortably above the $120,000 needed. Had the owner worked from the $1.2m figure they’d have expected much more.

The exit is to finish the flat in four months, lease it, revalue and refinance with a longer-term lender, with a two-month buffer. The lender wants the building contract, the approval, the insurance confirmation and the lease plan. Illustrative only: the percentage and figures are round numbers to show the arithmetic, not an offer.

How fast can this move?

For standard property, a decision is possible within 24 hours, and $20k to $250k is possible same day when the loan is property-secured and the file is complete. Larger amounts, up to $5m, are possible within 24–48 hours once the file is complete. A renovation adds a few steps: usually a full valuation and a check of the approvals and insurance. If you have the pack ready at the start, you take most of the delay out. If you don’t, the clock starts when the missing pieces arrive, not when you enquire.

Before you apply, check these five things

• Your as-is equity, worked out with a conservative figure.
• Whether approvals are in place and the builder is licensed.
• Whether your insurance covers the works.
• A dated exit with a buffer.
• What the money is for, in business terms.

Find out where you stand

If you own a property that’s mid-renovation and a business that needs funding, tell us about both. Enquiring takes about 60 seconds and doesn’t involve a credit check, so asking won’t touch your credit file. We won’t send your details out to a long list of lenders. One person reads your enquiry, thinks about how the property is likely to be valued as it stands and calls you to talk it through. Please fill the form in accurately, including how far through the work you are, so that we can match the right option first time. Check your options →