Navigating Prefab Home Financing: Your Comprehensive Guide with Advance

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Navigating Prefab Home Financing: Your Comprehensive Guide with Advance

22nd Aug 2023

Stepping onto the property ladder might seem intimidating, especially when financing your dream home. But fear not, Advance Build, a trusted leader in prefab home construction in New Zealand, is here to help navigate the journey. One of the most common questions is in regards to financing your prefabricated home – what options are available, and where to get started.

Prefab homes are rapidly gaining traction in New Zealand, reflecting a significant shift in the housing market. This trend correlates with a growing global recognition of the numerous advantages these homes offer – speed, affordability, and sustainability, to name a few. Prefab homes are constructed within a controlled environment, reducing build time and minimising weather disruptions, thus providing a speedy, streamlined process. In the case of Advance Build, our high-quality prefabricated homes are constructed in our purpose-built Kerikeri factory before being loaded on a truck and transported to their final destination. By approaching new home builds in this manner, the project is extremely quick and cost-effective due to the efficient use of materials and minimal site disturbance. In addition to this, our homes champion sustainability, with lesser waste and a smaller carbon footprint compared to traditional construction methods. As the call for affordable and environmentally-friendly housing in New Zealand intensifies, prefab homes stand at the forefront, meeting these demands with innovative, efficient, and affordable solutions.


Bank Lending: Getting a Mortgage on a Prefab House

As prefabricated homes increase in popularity, banks are tailoring financing packages specific to the unique building process. One such example is Westpac which now offers a prebuilt home loan. Requiring as little as 10% deposit, Prebuilt home loans work similarly to conventional construction loans. However, they’re uniquely designed to cover prefabricated homes that are built in a factory and then transported to your site, making prefab homes quicker and more cost-effective to build.

There are a couple of extra requirements with a prebuilt home loan to provide further financial protection. Firstly, additional insurance cover is required during the various stages of the construction process, including the initial build and transportation to the site. Secondly, there are certain requirements that your builder must meet before construction can commence. These measures ensure that you’re not only investing in a dream home, but also safeguarding your investment every step of the way.


Prefabricated Home Loans

Financing Your Prefabricated Home with Advance Build

Financing a prefab home is a unique process, and understanding it can be crucial for potential homeowners. Just like traditional homes, prefab homes often require a financial plan, but the structure of these plans can look a little different. While Advance Build does not offer long-term financing solutions, we do provide bridging finance to help facilitate your lender’s requirements during the construction phase. It is worth noting that some banks might be hesitant to finance a prefabricated home. The main reason for this is due to the limited security of their funds during the construction process at our factory rather than onsite. This problem is remedied once the home has been transported to its final location as the bank is able to regain security in their investment, putting them in a position to be able to release the funds. To address this, Advance Build offers deferred payment options to provide bridging finance to cover the factory construction period, allowing you to comfortably manage your finances while your dream home is being built.

Advance Build offers three different finance options, subject to terms and conditions. Find out more about Financing your prefabricated home with Advance Build


Construction Loan

A construction loan is another excellent financing option for prefabricated homes in New Zealand. This type of loan is designed specifically for homeowners looking to build a new house rather than buy an existing one. Construction loans differ from regular home loans in that the bank releases funds progressively over different stages of the building process.

For prefab homes, these stages can be defined as the deposit phase, construction in the factory phase, and the final settlement once the house has been set up on your land. This setup ensures that you only pay interest on the funds that have been used so far, which can lead to significant savings. As mentioned earlier, this can be difficult to secure at times due to the home being built off-site.

It is important to understand that construction loans require a higher level of detail and preparation, including comprehensive building plans, council approval, and a fixed-price building contract. Despite the initial work involved, a construction loan could be a beneficial way to finance your prefab home, especially with its potential to accommodate the unique building process and save you money.


What Potential Homeowners Need to Know

When considering financing for your prefabricated home, it’s crucial to understand eligibility criteria, the pre-approval process, and the necessary documentation needed for the loan application.

Eligibility Criteria and Requirements

Each lender will have its own set of eligibility criteria and requirements for prefab home loans. These commonly include being a permanent resident or citizen, being able to prove a steady income, and having a good credit history. It’s also worth noting that the value, size and type of the prefab home you’re planning to build will influence the loan terms.

The Pre-Approval Process

Pre-approval, or conditional approval, is a great way to understand your borrowing power. It provides a realistic budget before you start house hunting and can give you more credibility with sellers. To obtain pre-approval, you’ll need to provide the lender with a detailed financial snapshot, including your income, assets, and liabilities.

Necessary Documents

Be prepared to provide documents such as your identification, proof of income, information about your existing assets and liabilities, and personal insurance documents. If you’re self-employed, you’ll likely need to show two years’ worth of financial statements as well.

Improving Credit Scores

Your credit score plays a significant role in securing a home loan, as it demonstrates your ability to repay the loan. To improve your credit score, ensure you pay all your bills on time, don’t apply for unnecessary credit, and regularly check your credit report for any errors.

Financial Readiness

Before applying for a home loan, it’s a good idea to reduce your debts as much as possible. This can improve your borrowing power and help you secure more favourable loan terms. Also, the more money you’ve saved for your deposit, the less you’ll have to borrow.

Remember, financing a prefabricated home can seem complicated, but with the right information and support, it doesn’t have to be. By understanding your options and getting your finances in order, you’re paving the way for a smooth financing journey. Advance Build is here to guide you every step of the way, so don’t hesitate to reach out to us for more information and support on prefab home financing.


The Cost Advantages of Prefab Homes

Prefabricated homes come with an array of cost advantages over conventional building methods. A significant factor contributing to these savings is the reduction in labour and material expenses. Since prefab homes are assembled in a factory, the construction process is streamlined, thus reducing project delays and cost overruns due to weather conditions or site complications, often experienced in traditional construction.

Reduced Labour Costs

Labour costs are significantly reduced with prefab homes. The construction process is highly efficient as components of the home are manufactured and assembled in a controlled factory environment. This setting allows for the optimisation of materials and labour, minimising wastages and extra hours that are common in traditional construction sites.

Lower Material Expenses

Prefab homes also help cut down on material costs. With the factory’s bulk-buying capability, materials are procured at a lower cost, and waste is reduced as offcuts can be recycled into other projects. These savings are directly passed on to the homeowner.


In Conclusion

Navigating the financial aspects of purchasing a prefab home can initially seem challenging. However, as we’ve discussed, with the right knowledge and support, it becomes a journey that is both manageable and rewarding. From understanding the unique advantages of construction loans, to improving your credit score and reducing debts for better loan terms, each step brings you closer to your dream prefab home.

Advance Build is committed to making this journey as straightforward as possible for you. Our prefab homes not only offer considerable cost advantages through reduced labour and material expenses but also guarantee quality and efficiency through our controlled factory environment.

Why leave your dream home to chance when you can have it meticulously planned and executed? We’ve been building prefabricated homes for over 15 years, and have helped 100s of happy homeowners navigate the financing process for their prefabricated homes. So if you are looking to get started on your prefabricated home journey with Advance Build, don’t hesitate to get in contact with us today!


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