Finance for Removal Homes

Five Things You Need to Know

Obtaining finance for housing projects has become more difficult recently due to tighter lending criteria as a result of the Banking Royal Commission. Finance for Removal Homes can be even more difficult because of a number of things unique to Removal Homes, so it helps to have some background before you start applying for loans.

1. Its worth taking some time and effort

The benefits of a Removal Home are significant, so it does pay to invest some time and effort to see if its possible to achieve what you want to do. Don’t be discouraged by negative comments from lenders or others. Many people do obtain finance for their Removal Home projects after exploring the options available to them. Be prepared to try different lenders, different lending products, and creative ways to make your dream come true.

2. Find a good finance broker prepared to work with you

Many people find that approaching their bank direct does not work. Banks often have narrow criteria for lending and something a little unusual like Removal Homes is not something they generally have a standard product for. A good finance broker will take the time to understand your particular financial position and be able to advise which banks have lending products that fit your lending profile, borrowing capacity and financial situation.

3. Understanding how banks treat security and equity

Lenders will generally require security (a mortgage) when providing finance for property. Exceptions to this may include some types of personal loans, credit cards, business loans etc. Security is usually in the form of property that is not already encumbered by finance, or property that is worth more than the amount of finance already secured on it. The value of the property less the amount of finance secured against it is called equity.

If you have equity in the land you want to put a removal home on, or any other property you own, then this could be used for the security required by the lender. You will need sufficient equity to allow the lender to advance money to pay for the house you want to buy plus the cost of getting it delivered and installed on the land. This is because unlike a property with a house already on it, or new house being built in stages, the lender cannot use the value of the removal home when calculating its security value until the house is actually installed on the land.

Once the house is in place a lender can revalue the property to include the improvements and potentially lend further money against their security held.

4. How to use your cash

If you have cash for a deposit on your land, or to perhaps pay for the house and delivery, you are in a better position to fund a Removal Home. If you are borrowing to buy land, it might be better to keep any cash you have aside if you can rather than using it as deposit on the land. Borrowing as much as you can upfront on the land can put you in a better position as you may have more cash to use for funding the house and delivery without having to use equity instead.

5. Other finance options

You may need to get a bit creative to obtain the finance you need. You may find you just need to “bridge” the gap with other means to get the house delivered and installed before the bank can refinance your loan including the improvements on your land. The bank of Mum and Dad has been used by many young buyers, and some have even used credit cards or personal loans (not requiring security) to fund the house purchase and delivery prior to refinancing. Discuss the potential options with your broker to find the best ways to do it.

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