Modular Home Financing - Can it be done?

Modular and Container Homes are becoming increasingly popular, why haven't financing solutions kept up? Modular (off-site construction) is the way forward. Think about it, when you go to a restaurant, the chef doesn’t bring out the ingredients and start cooking on the table in front of you! He cooks in a clean, specialised environment and delivers the fully cooked meal on a well-presented dish. Building homes should be no different.

The Problem:

What is holding back the home building industry is not the lack of skills, but access to suitable finance (the cash needed to fund building works). When building a home in the traditional method, customers enter an AS 4300 or AS 4902 (design and construct) contract with a builder.

The contract is split up into numerous stages (typical progress payments are 5-15% of total contract value). At each stage, the client (or their financier) releases a small portion of money pay the builder for completed works. This process repeats until completion when the house is handed over & the builder is fully paid up.

This system is safe for the banks and limits their potential losses in the situation of the builder going broke during the project. If you’ve been reading our blogs, you’ll know that this system doesn’t work when it comes to modular building. Manufacturing takes place off-site with a large chunk of the work being completed before any site works even begin.

The fabricator of the modules will want to be paid progressively for their work. Before making such payment, the bank will want security for such payment in case the fabricator becomes insolvent.

We have a chicken and egg situation;

· The banks want assurance that their money isn’t at risk in 2 different locations.

· The fabricator needs payment to begin works in the factory.

Our Solution:

We are offering a solution that allows clients to access the benefits of modular building for their projects. Upon providing Dwellie with a bank guarantee for the value of the building contract (click here for a video explaining exactly how a bank guarantee works), we provide upfront financing for your build such that our clients do not need to make any cash payments until your project has reached PC (practical completion). This is a great solution for both property developers and residential clients.

WE HOPE traditional banks will also begin helping out with a form of modular financing. This is really the sticking point which will enable mainstream access to this type of construction. We have clients who have had success outside of the Big Four banks. I.e - The Bank of Melbourne and Bendigo Bank. If you enjoyed reading this post, learn more about how modular building can benefit Property Developers!

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