Kit Home Loans
What is a Kit Home?
A kit home is a standard house that is partially built in sections in a factory which can then be assembled on site by the owner or a registered builder. This type of DIY home construction can save you a significant amount of time and money depending on what type of home you want and where you are building.
We recommend that you only consider constructing a kit home if you have experience working in the construction industry or are hiring a builder to construct the kit for you. If you are building the home yourself then please refer to our owner builder page.
The progress payments problem
The major problem encountered by people who are buying a kit home is that most lenders do not allow owner builder loans or will ask for you to pay for the kit up front using your own funds.
The kit home manufacturers normally want to be paid before the kit leaves the factory, and yet your bank will not lend until the house is complete! Some manufacturers can sell their kit in sections which can match the progress payment schedule used by most banks. Because of these potential issues it is essential that you call us on 1300 889 743 or enquire online to see if you are qualified for a loan and so that we can help you to choose the right lender to fund your project.
When will my bank release funds?
We can help you release funds for your project in the following situations:
If you have enough funds or equity to pay for the kit yourself up front and are using a licensed builder then we can help you fund the construction of the home in regular progress payments. The bank will ask for you to pay for the kit however will release funds in progressive payments to the licensed builder that you have hired to construct the kit for you.
If you do NOT have enough funds to pay for the kit yourself up front and are using a licensed builder then we can help you fund your construction project only if you have payment terms with the kit home manufacturer that will allow you to pay them on the completion of the home OR alternatively your builder may purchase the kit and include the cost of this into his progress payments from the bank.
If you are not using a licensed builder then please refer to our owner builder page.
How much can you borrow?
First home buyer: Up to 90% of the value of the land plus the cost of construction.
Investor: Up to 90% of the value of the land plus the cost of construction.
Low doc: Up to 80% of the value of the land plus the cost of construction.
Discounts: Competitive professional package and basic loan discounts are available.
Note: Financing a kit home isn’t as simple as financing a normal construction project. Please call us on 1300 889 743 or enquire online to talk to a mortgage broker in our office for expert advice.
Why are the banks conservative?
Australian lenders treat kit homes very conservatively as they are worried that if they release funds to pay for the kit up front and something goes wrong with construction then they will be left with only the land as security, which may be worth less than the loan amount.
For this reason they generally only release funds for the kit up front if you have significant equity in your land or will delay payment until the kit is “adding value to the land”. This is normally when the kit has been completed! We can usually work around this if your kit home supplier can be paid in stages or if you are using a licensed builder by including the kit in his construction contract.
Tips to help you finance & build your kit home
Follow these simple tips to avoid headaches down the track:
- Don’t run out of money: If you run out of money during construction then in most cases the banks will NOT approve a loan increase for you. In other words, you are in big trouble!
- Don’t change your plans / budget: If your budget, plans, design or specifications change then most banks will reassess your application from the beginning. If you haven’t got a final budget completed or don’t have final council approved plans then apply for a pre-approval instead. Once you are certain there will be no changes then you can apply for formal approval.
- Keep it simple: Australian banks don’t work well with “outside of the box” procedures for their loans. It is often easier to make small changes to your process or to comply with bank procedures than it is to argue with the bank. If your situation is outside of the box then apply with a lender that can help you rather than trying to get your bank to assist with something that is outside of their normal process or lending guidelines.
Apply for kit home loan
Our mortgage brokers are experts in construction loans and know how to help you get your mortgage approved! Please call us on 1300 889 743 or enquire online to talk to a mortgage broker in our office. We can quickly work out if you qualify for a mortgage and then help you to apply with the most competitive bank.
