Are you thinking of building a new home and in need of some free home loan tips? Then we have you covered.
With small homes and granny flats on the rise, Australian families are looking into the best and cheapest methods to build. Some of these alternatives to a traditional build are kit homes and transportable homes.
But when it comes to securing finance, did you know that the banks actually treat these three methods very differently? Find out more before you plan to apply for a mortgage and get burned.
Funky Little Shack founder Mel Miller recently sat down with Brisbane mortgage broker Ryan Carter for an in-depth discussion on the differences between these three types of build. Check out the video below, or keep scrolling to read more.
What About Kit Homes?
A kit home, or modular home, is when the frames, trusses and materials are prefabricated and delivered to your property. From there, a builder just needs to assemble the pieces.
Flexibility and cost-effectiveness can be big benefits to this kind of construction. But Ryan Carter explains that you either better be cashed up, or have the ability to borrow a large amount before you go down this route. A traditional mortgage is out of the question.
“[The banks] actually won’t put any value on the proposed dwelling until it is actually on site, affixed, and completely finished,” he said.
“The way the bank views it is that you’re actually paying for the builder’s labour, rather than for them to provide the materials and all that.”
Usually this means that you will need to own the land outright. And because the banks are unable to finance the project, you’ll need to borrow the $100,000 to $200,000 required and pay for it up front.
What About Transportable Homes?
Talking about prefabricated building materials, let’s talk about transportable homes. These are dwellings that are completely built in a factory, and then shipped out to your site on a truck and installed.
You’ll see this quite frequently with “shipping container homes” and other small dwellings that are easy to transport. As a result, they can be very cost effective ways to buy a new dwelling.
However, when it comes paying for it, Ryan Carter says you’ll be faced with the same problem as financing a kit home. The banks won’t go for a typical mortgage.
“It’s pretty much the same story… it really needs to be finished,” Ryan said.
There are certainly ways to secure finance after you’ve borrowed the money required to pay the manufacturers. But Ryan warns it becomes much more difficult to navigate.
So What About Traditionally Built Homes?
This is your old fashioned method of building a home. Materials are delivered to your property and your builder puts it all together from the ground up.
According to Ryan Carter, if you’re looking for the easiest, most straight method of financing it, then a traditional build is the way to go.
“Your traditional build, which Funky Little Shack currently do, is way easier than a modular or transportable home,” he said.
“It’s a basically a standard home loan. You can use that as a complete valuation. So the banks can progress pay the builders.
“A traditional build is a much simpler, smoother, less stressful process.”
I Want To Learn More!
If you’re looking for some more free home loan tips, head here to check out Part One of our interview with Ryan.
Or if you’re thinking about designing your own small home or granny flat, give us a ring on (07) 5679 6171 or email email@example.com. We’ll help you cut down on household bills and still live in luxury.
We create custom homes ranging from $100,000 to $200,000, depending on size and location. We also design plans from just $2995, which you can take to the builder of your choice.
Head here to see your options. We’d love to have a chat and help you out!