Can I Get a Mortgage for a Modular Home?

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Podcast approved by The Openwork Partnership on 24/01/2024.

Can I Get a Mortgage for a Modular Home?

Lee McAteer talks us through mortgages for modular homes.

What is a modular home? Are prefab properties modular homes?

Modular homes are in essence built in a factory. They are a type of non-standard construction.

All modular homes are prefabricated, but not all prefab homes are modular. ‘Modular’ represents a kind of specific construction, and prefab is short for prefabricated. It’s just a way of describing the type of construction. But they are very similar.

Can I get a mortgage on a modular home?

Yes, but a modular home is seen by lenders as non-standard construction. The traditional high street lenders may not offer you a mortgage on those particular homes.

You normally need to speak to specialist lenders – and that’s where brokers can help you. We have experience with this type of construction and we deal with those lenders on a daily basis.

Can you get a mortgage for a house with modular extension?

It will again come under the same umbrella of non-standard construction. If part of the property is non-standard, then you will potentially need a specialist lender. It just depends on the details of that extension.

How much can I borrow on a modular home mortgage?

Generally, as a rule of thumb, you can go up to 75% loan to value. Some lenders may go higher. In terms of affordability, you may be able to borrow around 4.5 to 5.5 times your income. It depends on your circumstances and the type of home you are looking to purchase.

How hard is it to get a mortgage on non-standard construction?

It’s not hard, as long as you know you’re going to fit the lender’s criteria and you’ve got all your ducks in a row. If you’re looking to put plans in, we need to know what’s going to be constructed and all the details of the property.

Then it’s down to surveyor comments and the lenders’ criteria. There are plenty of mortgage lenders we can approach – we just need to make sure we have all the details before we put an application in, to avoid wasting time and effort.

Are modular homes a good investment in the UK?

They can be a good investment, but a modular home may have a limited lifespan. We have bricks and mortar houses that are hundreds of years old, but that won’t necessarily be the case for modular homes.

Some lenders will want guarantees that there are at least 60 years left on the property lifespan, for example. So you’ve got to look at the future saleability. A wood construction obviously won’t last as long as bricks and mortar. So it depends on the lifespan and the individual property details.

Do modular or prefab homes need planning permission?

It depends on what you’re going to be doing, but if you’re going to build from scratch it’s going to need planning permission. If you’re going to have an extension of a certain size, that will also need planning. It’s property specific, but generally you are going to need some sort of permission.

Which lenders offer mortgages on modular homes?

There are quite a few, but the standard high street lenders don’t tend to offer them. There are hundreds of lenders in the UK that you can access, so there are plenty to choose from.

What if I have bad credit? Can I still get a mortgage on a modular home?

That will potentially reduce the number of lenders you can access, but there are still lenders that will offer adverse credit mortgages on a modular home.

What are the pros and cons of modular homes?

The main pro is that it’s a cheaper form of construction and build, while the main con is the lifespan and saleability. Modular homes can be more energy efficient. So it’s about taking those pros and cons into account and making your own judgement.

There are lots of new, modular designs that are very eco-friendly and some can last for a long period of time – it is very property specific.

Are there any government schemes to help with buying a prefabricated house or modular home?

There’s the Help to Build scheme, which can cover prefab and modular homes as well. So it’s worth having a look at that.

What other types of financing are available for a prefabricated house or modular home?

The main option is a mortgage, but there are some self-build options as well. Talk to a broker to understand what the options are for your specific plans.

How can a mortgage broker help me get a mortgage for a prefab property or modular home?

A broker can be invaluable. You might go to a lender and provide all your information and for whatever reason, it doesn’t fit their criteria. Then you’ve got to go to another lender and put the case across to them.

Having a broker would help you with that – we tend to get it right the first time, rather than trying lots of different lenders. We will have experience on the particular build that you’re looking at. We’d know which lender is going to help you get the result you need.

Approved by The Openwork Partnership on 24/01/2024.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.