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Display Home Mortgage

Display homes help those who are building a new home to visualise what the property will look like upon completion. However, what if you want to purchase a display home to live in?

Financing a display home isn’t easy! Many banks do not accept display homes as security for a mortgage. Read on to find out how to finance your investment.

How much can you borrow?

  • First home buyer: 95% loan are considered if there is no leaseback agreement.
  • Investor: 90% of the property value. Please see below for criteria for borrowing over 80% of the property value.
  • Low doc: N/A.
  • Discounts: Competitive professional package and basic loan discounts are available.

Criteria for display home loans can be quite tricky with many factors to take into account. As a general rule the more restrictive the terms of the leaseback agreement and the less likely it is that a standard tenant would want to live in the property then the less available finance will be.

Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will help to get your loan approved.

What are the approval criteria?

The approval criteria that lenders use for display homes is focused on the leaseback agreement between you as the investor and the builder as the tenant. The following are typical approval criteria:

  • Most lenders: Do not consider Display homes unless the lease to the builder has been completed and they can now be leased to any tenant you choose.
  • 80% LVR loans: The lenders that lend to 75% or 80% of the value of the property require that the term of the lease is for no more than two years. Rental income is assessed at normal market rates.
  • 90% LVR loans: The lender that can consider loans for up to 90% has the same criteria however has an interest rate that is around 0.3% higher than the Bank Standard Variable rate.
  • Homes in a display village: If your investment is inside an exhibition home village then please contact us to discuss the terms of the leaseback arrangement and the expected life of the village. These can be considered if there is a bank guarantee from the builder or if your income is such that you can prove that you can afford the loan without the need to take rent income from this property into account.

Why are the banks so conservative?

There are a number of reasons why lenders are very conservative when using an exhibition home as security:

  • The terms of the leaseback agreement may be in the builder’s favour.
  • The length of the lease may be quite long, reducing the saleability of the property.
  • The rental agreement is often for above market rents, which are not sustainable.
  • If the house is inside a display home village then it may be more difficult to find another tenant if the builder cancels the lease.

If you are considering buying a display home then please discuss the terms of the lease with your solicitor. In particular discuss the possibility of the builder defaulting on the lease and the options that you would have in this event.

For help with applying for a loan please call us on 1300 889 743 or enquire online and our expert mortgage brokers will get back to you.

What is a display home?

Display home villages are one of the most common ways for Australians to view a variety of home designs & house plans all in one spot.

They allow potential owner builders to visualise what their house will look like when completed and make possible alterations to the existing plan to suit their individual needs.

Many large villages such as HomeWorld have houses on show from several major builders, whereas larger builders such as Metricon or AV Jennings may have their own centres.

Advantages of buying a display home

There are many advantages of buying a display home and it is very common for most newly built homes to be sold.

  • Homes are well maintained and as they do not have people living in them on a daily basis, they are better looked after than other existing homes.
  • The houses may have new features or additional extras that other properties do not have. They may have installed to demonstrate to possible buyers, what the higher end houses with more expensive building materials look like.
  • Depending on how old the home is, it may be sold at a reduced rate. Most builders want to sell the homes as soon as possible to free up the capital and continue to fund other house and land projects.
  • If you were looking to build the same house on vacant land, it may end up costing more and being a more stressful process. With your dream home already built, all you have to do is move in!

Disadvantages of buying a display home

Despite the positive aspects, buying a display home still requires some careful consideration.

  • Building on your own land means that you can choose to live in an area that is an estate. Most display homes are built in villages. If the location does not suit you, buying a display home or living in a display village, may not be for you.
  • As display homes are essential built for demonstration purposes, it may not have all the living features you require or may not be built to a good standard, especially if the builders were trying to meet a deadline.
  • Most display homes are used for many years before being sold, so you are still buying a used home.

Companies that have display homes

A variety of companies nationwide build display homes. These include:

  • Hotondo Homes
  • Rawson
  • Binet Homes
  • AV Jennings
  • Urbayne Homes
  • Metricon
  • Englehart
  • Asgard Homes
  • Bellmarch
  • G.J. Gardner

Do you need help from an expert?

Our mortgage brokers are specialists in helping people to buy a display home. If you are having trouble financing your investment then please call us on 1300 889 743 or enquire online and one of our brokers will call you to discuss your options.

  • Updike

    Do the banks lend for the full value of the display home provided by the company or the bank will order valuation of its own?

  • Hi Updike, the Bank will in all cases order a valuation and go by the valuation report or the property price given to you by the company, whichever is lower.

  • raven

    I’m just considering the possibility of buying a display home. Do you guys have any suggestions / advice on this?

  • Hey raven,

    If you are considering buying a display home then be sure to discuss the terms of the lease with your solicitor. In particular, you should discuss the possibility of the builder defaulting on the lease and the options that you would have in this event. Also, do your due diligence and research accordingly. Banks are generally conservative when it comes to financing display homes so you’ll need to prepare yourself to get the best chance for home loan approval.

  • raven

    True, thanks. I’ll continue checking out other property types.

  • reinhold

    The display home I want to invest in is inside an exhibition home village. Can you guys help me get a mortgage to finance this?

  • Hey reinhold,

    We can help with this. We will need to discuss the terms of the leaseback arrangement and the expected life of the village. These can be considered if there is a bank guarantee from the builder or if your income is such that you can prove that you can afford the loan without the need to take rent income from this property into account. Please call us on 1300 889 743 or simply place an online enquiry:
    http://www.homeloanexperts.com.au/free-quote/