Loans for Modular Homes? Here's How to Secure Approval

Modular homes are gaining popularity in Australia due to their cost-effectiveness, sustainability, and faster construction times. However, many potential homeowners face uncertainty when it comes to financing these types of homes. If you're considering a modular home, you might be wondering if banks provide loans for them and what the terms might be. Let's explore this in detail.

Understanding Modular Home Loans

Modular homes, also known as prefab homes, are built in sections in a factory setting and then transported to the construction site for assembly. This method differs significantly from traditional stick-built homes, influencing how banks view them for financing. Unlike mobile homes, modular homes are considered real property once assembled and can appreciate in value. This distinction is crucial when seeking a loan.

Interest Rates, Requirements, and Options

When it comes to financing modular homes, most Australian banks offer loans, but the terms can vary. Interest rates for modular home loans typically range from 6.49% to 12%, depending on the lender and your financial profile.

Typically, lenders require a deposit ranging from 10% to 25% of the home's value. They also evaluate your credit history, income stability, and the location and value of the land on which the modular home will be placed. Some lenders may have specific requirements about the builder or the type of modular home, so it's crucial to consult with them early in the process.

How to Secure a Loan for a Modular Home

Securing a loan for a modular home involves several steps:

1. Research and Choose a Lender: Start by researching lenders who offer modular home loans. Consider reaching out to Esteb and Co, which has access to over 83 lenders, to find competitive rates and terms.
2. Prepare Your Documents: Gather necessary documents such as proof of income, credit history, and details of the modular home and land.
3. Submit Your Application: Complete the loan application with all required details. Be prepared to explain why a modular home is a sound investment.
4. Appraisal and Approval: The lender will appraise the value of the home and land. Once approved, you'll receive the loan terms.
5. Finalise the Loan: Review and sign the loan agreement. Ensure you understand all terms before proceeding.

Tips and Considerations

Here are some expert tips to consider when financing a modular home:

• Builder Reputation: Choose a reputable builder with a track record of meeting lender requirements.
• Land Considerations: Ensure the land is suitable for building and has the necessary permits.
• Budget Wisely: Consider additional costs such as transport, assembly, and site preparation.
• Consult a Broker: Work with a mortgage broker like Esteb and Co to navigate the options and secure the best deal.

Frequently Asked Questions

• Can I get a loan for a modular home with bad credit? While it's challenging, some lenders might consider your application if you have a substantial deposit or a guarantor.
• Do modular homes depreciate in value? Unlike mobile homes, modular homes are considered real property and can appreciate over time.
• Are there government incentives for modular homes? As of 2026, there are no specific government incentives for modular homes, but check for local grants or programs.
• What is the typical loan term for a modular home? Loan terms can range from 15 to 30 years, similar to traditional home loans.
• Is insurance required for a modular home loan? Yes, lenders typically require homeowners insurance before approving the loan.
• Can I refinance my modular home loan? Yes, refinancing is possible and can be a good option if rates drop or your financial situation improves.
• What if I want to sell my modular home? Modular homes can be sold like traditional homes, and their resale value depends on market conditions and property maintenance.