Rising house prices have led some Aussies to choose modular or prefab homes over more traditional houses. Having said that, it’s still challenging to secure finance for your modular home. Before applying for a loan, it’s good to get an understanding of the modular home loan requirements and the application process.
What is a modular home?
A modular home is a building that consists of pre-built parts or modules that can be put together relatively quickly. Each module ends up being a separate section of the house. The modules are made separately and are then joined together with links.
You can either design individual modules yourself or choose from a template, much like you would if you were building a different type of home.
As modular homes are built elsewhere then delivered to their final site, most lenders treat them differently to other bricks and mortar. Lenders may hesitate to provide funding for a house that not only hasn’t been built, but isn’t even being constructed on-site. In fact, some lenders consider modular homes to be riskier than other houses, because if you default on the loan before the house has been assembled at the final location, they don’t have as much recourse.
What is the maximum loan amount for a modular home?
Given modular home lending arrangements are a bit different to regular home loans, it’s worth checking with lenders how much you can borrow and what the interest rates for your modular home loan are.
How can you secure a loan for your modular home?
Although it may be slightly more challenging, some lenders are willing to provide home loans for modular homes. There are a couple of considerations to keep in mind.
- Speak to lenders first - Before you go too far down the path of looking at modular homes, make sure you can reasonably secure finance to meet your needs. This will involve speaking to multiple lenders and seeing what their offerings are. You will need to compare your options before choosing a modular home loan in Australia that suits your requirements.
- Find a qualified modular home builder - Builders with a good track record and the right qualifications may improve the confidence of both the lender and you. It may require a bit of shopping around.