Modular and prefab homes explained

Innovative, green and efficient, modular and prefabricated homes can lead to greater quality control, but don’t ignore the costs.Modular homes feature

While some may steer clear of modular or prefabricated (prefab) homes due to the perception that they are “makeshift” or impersonal, modular homes offer several benefits to homeowners such as affordability, improved construction time and efficiency.

As the housing industry is labour-intensive and the cost of labour is going up, Australians are leveraging the innovation and technology of modular and prefab homes.

It appears that modular homes are not just an architect’s dream: The Australian prefab housing sector is forecast to grow by 5% per annum until 2023, compared to the overall industry, which is expected to see just 2.3% annual growth.

Although modular homes offer homeowners the ability to create bespoke designs that reinforce their environmental conscience, Australians should be mindful of the high transportation and holding costs of pre-engineered modular dwellings.

What are modular or prefab homes?

Modular or prefab homes usually refer to structural and architectural components that have been manufactured off site in a factory setting. Modular homes consist of several sections that are referred to as modules. The separate modules are then transported to their new location where they are assembled by a professional tradesman.

For locations with difficult access, the installation of the modules can be achieved by a crane or hydraulic lift.

Modular homes vs:

Conventional homes

Conventional homes

The main difference between a conventional home and a modular home is that the modular home is built off-site in a factory environment as opposed to on-site for a traditional build.

Mobile homes

Mobile homes

Also referred to as “manufactured homes”, mobile homes are never a permanent structure as they are prefabricated on a steel frame to be transported on their wheels. The wheels are never removed and are masked with skirting once the home is positioned.

Pros and cons of modular and prefab homes


  • Improved construction time. Prefab homes significantly lower the required construction time as they can be completed within just a few months. Another important consideration is that the automated construction of a prefab home has greater time certainty as it won’t be affected by weather conditions or site delays. Not only is an improved construction time convenient, it also helps reduce carrying costs associated with a longer construction process.
  • Customised design. Benefit from the flexibility of modular homes by customising them to suit your location and lifestyle needs. For instance, prefab homes can include materials and designs that are suited to your specific location, such as the energy rating of the area.
  • Less ongoing costs. Modular homes normally require less ongoing or future maintenance costs as they are often resistant to structural defects, such as wear and tear.
  • Reduced waste. Automated factory production of building elements allows for waste to be minimised so you can benefit from an environmentally sustainable design.
  • Quality control. A factory environment can guarantee quality of workmanship as homes are built in controlled settings with adequate processes and safety procedures. In a factory, there is also sufficient lighting.


  • Transportation cost. When transporting the modular home to the site, it can be transported by a hydraulic lift. However, if the site has difficult access or is on a steep gradient, you may need to get a crane to position the home. Depending on the complexity of the job, this transportation can cost $10,000-$25,000.
  • Renting cost. You need to factor in the cost of renting the factory space while the modules are constructed and tested. However, given that the build is efficient, this cost can be minimised.

What finance is available for modular homes?

Modular homesIt can be difficult to find finance to construct a prefab home as options are limited. This is because most lenders won’t lend to you for a property that isn’t permanently fixed to the site.

However, the upside is that it may be possible to organise the project so that modules are gradually delivered and fixed to the site, which would allow you to finance them.

Tips for accessing finance for a modular build

  • Approach lenders early. Approach your lender or mortgage broker early and explain the process of building your modular home. You may want to show them the floor plan, project specifications and timeframe so they can see that a modular home is just like any other newly built property.
  • Compare different lenders. While some lenders may be hesitant to lend you funds for a modular build, there are some lenders that will allow you to release funds prior to the modular home being positioned on site. It’s worth doing your homework and enquiring with several lenders to see what their stance is on modular and prefabricated homes.
  • Find flexible finance terms from the builder. Some builders will build your modular home with a progress payment plan as long as your loan has been approved by the bank.
  • Offer equity or guarantor. If possible, offer any existing equity that you have as collateral for the loan as this can make it easier to access funds for the loan. Another solution is to ask a relative to act as guarantor for the loan.

Modular homes are eligible for the first homebuyer grant. However, keep in mind that most lenders only lend money for modular homes if you have equity equal to the loan amount.

Speak to a mortgage broker about your modular or prefab home

Rates last updated February 22nd, 2018
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What is the design and construction process for modular homes?

While the construction method for a modular home will vary depending on the modular building company, prefab homes are generally built using the following process:

  • Design process. During the preliminary design process, you will speak with the company consultant to create a design that meets your personal and location requirements. A representative from the company will review and finalise the drawings and specifications for the build to ensure that it meets industry and council regulations.
  • Build and delivery. Once the construction phase starts, the company will assemble the mould and wall frames in accordance with pre-engineered settings. The structural framework and approved insulation will be installed, including windows, doors, flooring and cabinetry. Plumbing and electrical work will also be installed and tested.
  • Transportation. The home is loaded onto a truck and delivered to the site, where the building units are offloaded using hydraulic lifts and put into place.

Frequently asked questions about modular and prefab homes

Belinda Punshon

Belinda is a journalist here at Specialising in the home loans and property sections, she is passionate about helping Australians improve their financial wellbeing.

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2 Responses

  1. Default Gravatar
    keithJanuary 24, 2018

    do agcab portable cabins qualify for first homebuyers grant

    • Staff
      JonathanFebruary 21, 2018Staff

      Hi Keith, thanks for your inquiry.

      That is an interesting question. I believe this falls into a grey area since portable cabins do not always have a fixed address. As such, portable cabins may not qualify for first homebuyers grant.

      To clarify this detail, please contact the First Home Owner Grant department:

      1300 130 624*
      8.30am – 5.00pm Monday to Friday




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