Why getting approved can be tough!

A kit home is a standard house that’s 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’re building.

We recommend that you only consider constructing a kit home if you’ve experience working in the construction industry or are hiring a builder to construct the kit for you. If you’re building the home yourself then please refer to our owner builder page.

The progress payments problem

The major problem encountered by people who’re buying a kit home is that most lenders don’t allow owner builder loans or will ask for you to pay for the kit up front using your own funds.

  • Kit home manufacturers usually want to be paid in full before the kit leaves their factory.
  • If you’re using a licensed builder to put the kit together then the banks may consider a construction loan for you.
  • If you’re an owner builder then you’ll have restrictions on the amount you can borrow, typically at 75% of the land plus construction cost.
  • Even with a contract builder, you must have enough funds to purchase the kit up front.

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’s essential that you contact us to see whether you qualify for a loan.

When will my bank release funds?

We can help you release funds for your project if:

  • You have enough funds or equity to pay for the kit yourself up front and are using a licensed builder. 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 but will release funds in progressive payments to the licensed builder that you’ve hired to construct the kit for you.
  • You do NOT have enough funds to pay for the kit yourself up front and are using a licensed builder. 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. Alternatively, your builder may purchase the kit and include the cost of this into his progress payments from the bank.
  • You’re not using a licensed builder. Please refer to our owner builder page.

How much can you borrow?

  • Licensed builder: Up to 90% of the value of the land plus the cost of construction if you have a licensed builder.
  • Low doc: Up to 80% of the value of the land plus the cost of construction if you have a licensed builder.
  • Owner builders: Up to 75% or 80% of the value of the land plus the cost of construction. You must have additional funds as a contingency.
  • Borrow more with a guarantor: You can borrow the full costs of land and construction if your parents can secure your mortgage with their property.
  • Discounts: Competitive professional package and basic loan discounts are available.
  • Please read about the ‘progress payment problem’ section above before contacting us.

Financing a kit home isn’t as simple as financing a normal construction project.

Please call us on 1300 889 743 or complete our free assessment form 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’re using a licensed builder by including the kit in his construction contract.

Tips to help you finance and 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 won’t approve a loan increase for you. In other words, you’ll be in big trouble!
  • Don’t change your plans: 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’re 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’s 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 you with something that is outside of their normal process or lending guidelines.

Apply for a 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 complete our free assessment form 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.

  • Liam

    I’m building a kit home on my own and there’s been a slight increase of almost 15,000 than what was planned at the beginning. Will the banks consider the increase or not?

  • Hi Liam,

    Lenders are very hesitant to approve an increase for any construction loan to go beyond the initial plan. If you had previously borrowed a less LVR(Loan to Value Ratio) against your total cost, there might still be some possibility, however it would be a tough one. Your lender would be able to advise you on this.

  • Thrall

    Why are the banks so conservative towards owner builders?

  • Hi Thrall,

    Because several banks have noticed that there was a high incidence of owner builders changing their plans, going over budget or not completing the project, many banks and building societies have withdrawn their funding for people that are building their own home. Applicants that are licensed builders, have experience with one or more trades or are using a program such as the Home Building System are seen as a lower risk.

  • waddell

    I just want to borrow 20-30% to build on a cat 4 location and I’m also cashing out $100,000 equity to build. The construction cost is around $500,000 and all I need to do is build as I own the land. Not owner builder.

  • Hey waddell, since you’re borrowing a low LVR and will be using a licensed builder, it shouldn’t be a problem unless there are some potential credit issues that the lender may identify. Please call 1300 889 743 to discuss your situation and loan needs in detail with an expert kit home mortgage broker.

  • Dale

    Im having trouble getting finance, i am eligible for 1st home buyers grant $20,000 in Qld. My problem is i only need another $40,000 total to get into a 2 bedroom flat pak home, everywhere ive tried will only do minimum mortgage of $150,000

  • Hi Dale,
    It’s easy to finance a kit home when you have a lot of equity in another property or in the land itself. However when you’ve got a small deposit it usually cannot be financed.
    You could try borrowing money from family to complete the project and then refinancing and repaying them when it is complete. This doesn’t suit everyone of course, but it is an option.

  • Dale

    No family tho, its only $40,000. You would think it wouldnt even be a risk for a lender

  • Grace

    Aside from having a licensed builder at hand, what else are the requirements to qualify for the 80% low doc?

  • Hey Grace,

    Aside from the requirement of using a licensed builder, you’ll need to have an ABN and you must be able to provide evidence of your income using either BAS, an accountant’s letter or bank statements.

  • Malaisey

    My friend has found a kit home at a reasonable price at $310,000, and is planning to buy it. But he isn’t sure whether he can get a mortgage for it or not. Hey team, can he get a mortgage for this home?

  • Hi Malaisey,
    There are a few lenders who could help your friend, but please note that you should have sufficient funds to pay for the kit yourself upfront and should use a licensed builder. You could get 90% of the land value plus the construction. However, if you are not using a licensed builder then it will fall under owner builder policy and the borrowing will be severely limited. Please call us on 1300 889 743 to talk to a mortgage broker in our office for expert advice.