These home loans offer low costs, coupled with a host of features, giving the best overall value.
7+
Great
These home loans may have slightly higher interest rates or fewer features but overall, a competitive offering.
5+
Standard
Usually the home loans would offer above average rates. They may still include some competitive features.
0+
Basic
Higher costs and/or fewer features.
Key takeaways
Modular homes, or pre-fab homes, are homes that are built off-site in a factory or warehouse and then moved onto land.
These homes are more difficult to get finance for. You can often use a construction loan but you may need to pay a higher deposit as the bank can't use the property as security.
The Australian government wants to use pre-fabricated homes to reach its new homes target. This means banks are starting to make finance more accessible.
First, what is a modular home?
You know when you buy a piece of furniture from somewhere that isn't Ikea, it actually arrives already built and ready for use? A modular home is like that.
It's a 'prefabricated building' (try saying that 10x fast), also known as pre-fab or pre-made. Sections of the home are built in a factory or warehouse and then these 'modules' are moved on to your block of land. No on-site construction for you to worry about.
There are varying sizes of modular homes. They range from 1- or 2-bedroom properties, to big, beautiful mansions and even hotels and community buildings.
Building a modular home instead of a typically-constructed home can not only save on construction costs, but it's also much faster.
Do banks actually lend for modular homes?
It can be difficult to get a loan for a pre-fab home, but it is possible. You may be able to get a construction loan to cover the cost.
The problem with getting finance for modular homes is that because they're not built on site the lender can't use it as security. That's a risk for them.
It is possible to get finance, though. You'll just need to do your research and talk to lenders early on in the process. Some lenders have strict criteria on the types of homes they'll lend for. (For example, did you know it can also be harder to get loans for really small apartments?)
Big bank steps into loans for pre-fab homes
Although lenders have typically shied away from pre-fab loans, Commonwealth Bank recently announced it would offer a solution specifically for them.
This is off the back of a discussion at the end of 2024 where banks committed to addressing the barriers of financing pre-fab homes.
CommBank has said it will soon enable borrowers to access progress payments up to 80% of the total contract price. Currently, borrowers can be expected to fork out up to 90% of the price to pay for the home.
You'll need to check with specific lenders about whether they offer finance for modular homes. If they do, you'll need to confirm how much of the price they lender is willing to lend.
Finance for modular homes will usually come in the form of a type of construction loan.
You might be able to get a house and land package. This is where you take out a bundled loan to purchase the land and then pay for the construction.
Either way, construction finance works in a really specific way where the bank gives you the money bit by bit as the construction progresses.
Prefabrication homes are built in a different way where that doesn't really work, but some lenders will work with the borrower to come to an arrangement.
So how does financing work for modular homes?
As we said above, building a modular home doesn't fit with a typical construction loan payment schedule. Anchor Homes lists the standard schedule for a modular home as below:
5% - Contract and building permit
20% - Frame stage
25% - Lock-up stage
40% - Fixing stage
10% - Delivery, installation and site fit-off
What other financing options are there for modular homes?
It might be worth speaking to a mortgage or commercial broker about finding finance for your modular home.
You could be able to finance your modular home by borrowing against any existing properties you have. This is a risk in that the bank will use this as security and if anything goes wrong they could take the property.
Depending on how much money you have, you may also be able to take out a personal loan to pay off the rest of the property. You will be paying much higher interest rates though.
How much do modular homes cost in Australia?
There are a few factors to consider when it comes to how much a modular home costs:
The size of the home
Distance between build site of the home and destination
Material and customisations
Floor plan
HiPages estimates modular homes cost between $2,500 and $3,000 per square metre. In general it can start from $114,000 for an 85sqm 2-bedroom home with 1 bathroom. That's for your basic, run-of-the-mill home before you choose your customised upgrades to things like the inside materials, insulation or other features.
There are several Australian companies which supply modular homes, like Ecoliv Buildings. The homes start from $228,000 for 1- or 2-bedroom homes, but it also has more luxurious offerings from $656,000.
That's also before you actually move the home to your location.
The cost of transporting the home is usually around $1,000 per truck, per hour. As you can imagine, the number of trucks depends on the size of the house.
Tips for helping the modular home financing process run more smoothly
Speak to lenders early on in the process. As soon as you decide you want to build a modular home, start talking to lenders about whether they'll offer you finance. It will work in a different way to how they supply construction finance so talk to them about that.
Work with modular building suppliers. There are several companies in Australia that build modular homes. Engage in them early on to understand the process, so that you can have more helpful conversations with lenders. The companies may even know which lenders have experience with modular homes!
Get pre-approval. Once you know which lenders are willing to lend for modular homes and you have your estimates for the house from the supplier, it's important to get pre-approval.
If you want to build a modular home but you have bad credit, it may be harder to get finance. But standard home loans and construction loans have options available for borrowers with bad credit, so speak to those lenders upfront to see if they cater for modular homes. It may be harder though as modular homes can't be used as security until they're on the land, which increases the risk to the lender.
Alternatively, you may need to save up a much larger deposit and only rely on a smaller amount of finance. If you're ever in doubt, speak to a mortgage broker.
You may need a higher deposit to counter the risk to the lender, but otherwise you should be able to get a modular home as your first property. First home buyers often buy with a home and land package, so it would just be a case of confirming with lenders whether they would be ok offering this for a modular home.
Rebecca Pike is Finder’s money editor, with over 7 years of experience in mortgages and personal finance. A frequent TV and radio commentator, she frequently appears on Sunrise and 7News, Today and 9News, as well as Sky News, Channel 10 and across radio and print. Rebecca previously served as Editor of Mortgage Professional Australia. She has a Master’s degree in Journalism as well as ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products, which comply with ASIC guidelines.
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