The popularity of prefab homes is on the rise and with it, the availability of financing from banks. While traditionally, banks haven’t favoured the prefab building process, things are changing and more lenders are offering financing solutions.
Since the launch of the Westpac Prebuilt scheme in 2019, financing options for prefabs have become far more attainable, despite all the traditional challenges.
Challenges of financing a prefab home
Financing a prefab home can be complicated because the process is unique. Unlike conventional builds, prefab houses are built quickly and within strict time frames, because they are constructed in controlled factory environments with fewer unforeseen delays.
Being built all in one place with predictable delivery dates, the time wasted on travel and weather complications is significantly reduced, but unfortunately, the banks tend to consider this a riskier investment.
Prefabs do not suit instalment payments
For the conventional building process, banks will usually fund each stage of the building process in instalments so that they are protected if at any point the homeowner cannot pay.
Prefab homes, however, do not suit this payment situation because the building process is faster and not built on the owners section. So despite being quicker, banks tend to view prefabs as higher-risk than the slower alternative.
Some banks won’t finance offsite builds
Traditionally, banks have only invested in houses built on location because it’s easier to assess the value of the property. With a prefab home, however, banks don’t have the same security over the building until it is installed onsite. Since this isn’t until the end of the building process, some banks will refuse to finance a prefab house build, until such a time as the building is installed on its site.
First home buyers don’t have enough equity
Until recently, first home buyers have found it all but impossible to get financing for a prefab home because they don’t have the equity of an existing property to offer as security.
Without that equity, banks have often refused to finance prefab builds because the risk is too high, even though the building process is considerably more affordable and straightforward.
More banks are financing prefab homes
Regardless of all the obstacles, financing your prefab home is becoming increasingly achievable. Since the Westpac Prebuilt Home Loan was introduced in 2019, other banks have begun to recognise the value of prefab homes.
With their overall affordability and predictability, they are a smart investment and as more and more New Zealanders opt for them, the banks need to follow suit.
Of course, some banks still prefer to finance conventional builds, but as the pandemic and material shortages continue to disrupt the industry, many banks are realising that prefab houses are a viable alternative that needs financial support.
Westpac Prebuilt scheme
The Westpac Prebuilt scheme was the first of its kind in New Zealand and is purpose-designed for prefabricated houses. You only need a deposit of as little as 10% and approval is conditional meaning you have the luxury of time to find the right section and house plan. The finance is available throughout the factory-build portion of the build as needed, which means the build won't be held up.
It’s worth noting that there are some added conditions you’ll have to meet. Most notably, you will need to have additional insurance coverage for certain parts of the construction, such as during transport to the site. There are also certain criteria for your builders to meet but most prefab building companies will have these processes already in place.
Other banks to follow
While it is early days, you can expect many of the other major banks to launch similar finance schemes within the next few years. Prefab houses are popular for good reason and as the designs and processes continue to evolve, the banks are beginning to acknowledge their long-term value in the property market.
So if you’re wanting to build a prefab house, just keep an eye out for new schemes and talk to your mortgage broker for the most up-to-date information.
Partnerships with building companies
The best way to get financing for your prefab home is to speak directly with your building company. At Manor Build, we can guide you through the entire process and connect you with a lender that suits your needs and our procedures. The team at Manor Build have had extensive experience in obtaining finance for both our own projects as well as for clients.
By partnering with the building company, banks are more likely to invest in a prefab because the risks are managed carefully according to a set of agreed-upon guidelines.
The best financing for a prefab house
As funding becomes more readily available, it’s important to find the right option for your individual needs. There is no one size fits all so it’s important to discuss your options with the experts who fully understand the risks and obligations associated with prefab house builds.
At Manor Build, we can help you to organise the financing, land, and time frames for your prefab house so the entire process is seamless.
Planning your building schedule
With such high demand for new housing, prefab homes offer a quick and predictable solution. Unlike conventional onsite builds, we can complete your prefab house within strict time frames because the process is far more predictable.
During the financing stage, this is of significant benefit because it means we can help you to plan and align your finance applications according to your building schedule. If you have a tight deadline, we recommend talking to our experienced team who has the skills to meet it.
What's next?
For more information about prefabrication and how to secure financing for your new home, contact us first! Our team can answer any questions you might have and help you find a solution that suits your situation.
You can see for yourself how the prefab building process works by booking a factory tour where we’ll show you the different designs we offer or contact us for more advice on how to finance your very own prefab home.
