How Westpac is changing the prefab game for first home buyers

by Jeremy Richards

Prefab homes are generating more and more interest here in New Zealand. Built in factories and delivered to site completed, prefab homes can often be constructed in a shorter time frame and at a lower cost than a house that is built onsite. 

This can be helped, in part, to the fact that prefab homes are not affected by weather delays, material delays or relying on subcontractors, unlike traditional built homes. PrefabNZ estimates a prefab build can shave up to 15% from total construction costs and up to 60% off build times. For first home buyers this can represent great savings.

Unfortunately, like many things, there was a catch.

People looking to build a prefab home have been left feeling frustrated due to the simple fact that many lending companies refused to offer mortgages on prefab homes. This is due to the complex issues that are effected by the security of the house while it is being built in the factory - technically the house isn't owned by the customer until it's delivered. Yet it ends up having almost all of the borrowed funds sunk into constructing the home.

This was a particular issue with first home buyers as incentives like First Home Grants and KiwiSavers are tied to getting a mortgage. This meant that, despite the cost savings, prefab homes were out of reach of the group that would benefit from them the most.

Thankfully, Westpac bank has acknowledged this issue and has announced a pilot scheme with the intention to make it easier to get finance when building a prefabricated home. Westpac in New Zealand is the first bank to launch a dedicated mortgage product aimed at helping get Kiwis into prefabricated homes.

“We think homes manufactured offsite are crucial in addressing two key systemic issues: our housing shortage and a lack of affordable construction options”, says Westpac NZ Head of Home Ownership, Mark Dunmore. “For the first time, we’re offering a simple and streamlined process for prefab buyers and builders, which will help put more New Zealanders into affordable and well-designed homes.”

According to Westpac - normally when a house is built, the mortgage is released in parts as the house goes up and there’s material to secure the loan against. With a prefab house it’s in the builder’s factory until it’s almost done, so until now, the builder had to take the risk that the owner could get finance once it was finished.

“Our new way of funding essentially means we have security before the house is delivered, which removes much of the uncertainty for buyers and builders partnering on a build,” Mr Dunmore says.

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How first home buyers benefit from the new prefab mortgage

When building a new home one of the biggest challenges is sticking to a budget. This can be due to the weather, additional unexpected building costs, as well as rent or accommodation costs that can sneak up on the first home builder, especially if a build is delayed. The benefits of a prefab home are that all of these extra cost factors are eliminated. Because a prefab home is built indoors it is built in a controlled environment, which also means a controlled and reliable build process.

“This is a major step towards improving home affordability, especially for first home buyers. It will move prefab housing from sitting in the too-hard basket to being a viable choice for lots of Kiwis.”

Westpac Prebuilt is available to customers now. Standard lending criteria for constructions loans apply.

Can I use my KiwiSaver or a HomeStart Grant to buy a prefab home?

To answer this we spoke to Stephanie Murray Mortgages, mortgage advisors with an office in Christchurch. Founder and advisor Stephanie expanded on the availability of the mortgage and grant availability.

“The ability to draw down on your KiwiSaver, and being able to access government grants has been tied to your ability to secure a mortgage. Historically, this meant you couldn't access these grants to buy a prefab home. With Westpac's new mortgage you can use your KiwiSaver to help fund your deposit. If eligible, you could also access the KiwiSaver HomeStart Grant and the building grant within as well." Stephanie Murray

If eligible for these grants, this places a brand new home built just for you within easy reach. It can be tricky to find a brand new 3 bedroom home for under $500,000. Whereas land is seperate, here at Genius Homes you can easily find a 3 bedroom prefab home designs from $195,000, once you add land you may find you can achieve the same outcome whilst saving a little money.

This update from Westpac opens up a world of possibilities for first home buyers. Previously inaccessible affordable housing is now within reach. To discover whether you're eligible for this mortgage, and any grants we recommend speaking to your mortgage advisor. If you need helping finding a mortgage, or finding the best mortgage option for you Stephanie Murray Mortgages have an office in Christchurch and have experience helping first home buyers buy their first home.

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filed under prefab homes , first home buyer , prefab home finance

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