Home loans can be confusing at the best of times. Throw the words 'modular' or 'prefabricated' in the mix and people can start to feel a little lost.
For our West Australian clients, TR Homes work with finance expert David Busuttil of DB Finance, who specialises in home loans for prefabricated modular homes. We chatted to David about home loans for modular homes to answer the most common questions around modular home finance.
Q: Can I get a home loan for a modular home?
David: Yes. Banks will assist clients with funding to purchase a transportable/modular home, however there are many different policies for this type of property funding, which is why it is best to speak with me in order to understand your position. Then we can offer the correct advice around an appropriate funder based on your needs.
I aim to take away the stress of dealing with Bank staff and Mortgage Brokers who are not experienced in providing this type of funding. I have seen many situations where a customer has either been given the run-around or left disheartened by the advice they have been given. This is mainly due to a lack of knowledge around this type of funding.
Q: Are 'progress draws' allowed by Lenders for a modular home?
David: Generally, Banks do not allow progress claims for a modular home. While they will charge a progress payment fee as part of the loan arrangement, this is based on the Bank's valuer assessing the property when it has been landed and connected to the property to ensure the Bank's security requirements are satisfied - before making the final payment to TR Homes.
Q: What is the maximum loan amount a bank will lend to purchase a modular home?
David: Most Banks will only lend to 80% of the purchase price of the land and/or home, however there are providers within the major Banks that will lend up to 95% for a transportable home. There is also the option for Keystart funding for people who qualify within the Keystart policies. Lenders’ mortgage insurance is available to borrowers with less than a 20% deposit which allows them to enter the property market to purchase a transportable home.
Q: Does the bank charge a higher interest rate for a modular/transportable home?
David: Banks do not treat the pricing of a loan to purchase a transportable home any differently to purchasing a brick and tile established property. While modular homes are treated differently with reference to the release of funds, the pricing and establishment costs are consistent with any general owner occupied property purchase.