Updated: February 14, 2022

Prefab House Mortgages

Need a mortgage for a prefab house. or looking for ways to make your prefab house more mortgageable? Both can be done! Our guide will tell you how to do it!

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: February 14, 2022

Prefabricated homes have become increasingly popular over recent years as a more affordable way to get on the property ladder, meaning more and more people are looking for mortgages for this property type.

In this guide we’ll talk you through why buying a ‘non-standard construction’ home doesn’t have to be a barrier to finding finance and how a specialist broker can help smooth the process of getting a great mortgage deal for your prefab home.

Can you get a mortgage on a prefabricated house?

Yes, it is possible, although you may find fewer options are available than for standard housing. Whether your prefab is a leftover from the post-war era, or a more modern prefab design, it will still be classified as a ‘non-standard construction’.

Mortgage lenders see these types of property as a riskier option than a traditionally built home because there’s less certainty about how the house might change in value or what issues it might have in the future. It’s still possible to get a mortgage on a prefab home, just be aware that lenders may be more cautious and want to protect their investment with a larger deposit and less competitive rates.

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Types of mortgages available for these properties

If you’re buying an existing prefabricated house then your mortgage options are similar to if you’re buying a ‘standard’ home, but do expect to be asked for a larger deposit and potentially a higher income to cover the extra risk. The most common mortgage options are:

  • Repayment mortgage – every month you pay a mix of interest and an amount of the loan capital.
  • Interest-only mortgage – you pay off just the interest every month and have to pay off the full loan amount at the end of the term.

You can also choose how you want your interest to be calculated by either opting for a fixed rate mortgage, where rates are fixed for an agreed period, or a variable rate mortgage, which has the potential to go up or down depending on the base rate of interest. A specialist broker can advise on the best option for you.

How a broker can help you get a mortgage for a prefab property

It’s important to get advice early on if you’re thinking of buying a prefab home, as the process will be more complex and your finance options more limited.

A broker with specialist knowledge of this corner of the mortgage market is invaluable, as they will be able to guide you to the best lenders and products and help avoid any pitfalls along the way. They have deep working relationships with the lenders who offer these mortgages, and their connections can boost your chances of a positive outcome.

Because of the extra risk, eligibility requirements vary widely between lenders depending on your financial circumstances and the property type. A broker can help you prepare for any questions lenders may want to ask you and advise on the steps you need to take before you start your application.

Deposit requirements

The most common way that lenders mitigate the extra risk of lending against a prefab house is to ask for a higher deposit. Exact requirements will vary according to the lender, property type and the surveyor/valuer’s comments but could range from 25% to even 40-50% in extreme cases. The deposit might be even higher if you have bad credit or any other risk factors are present.

The loan to value (LTV) is the amount you’re borrowing, represented as a percentage of the value of the property you’re buying so, for example, a £150,000 mortgage on a £200,000 home would have an LTV of 75%. The lower the LTV, the higher percentage you have to put down as a deposit.

Self build mortgages for prefabricated properties

If you’re building your own prefabricated home then you may need a self-build mortgage instead. This is because you need a loan that covers both the purchase of the land you’re building on as well the property itself. A self-build mortgage differs from a standard mortgage in that it releases money to you in stages over the course of the build, either in arrears or in advance, depending on your cash flow requirements.

Typical stages include

  • The purchase of the land
  • Laying foundations
  • Constructing the shell
  • Making the building watertight
  • Wiring, plumbing and plastering
  • Completion and property valuation

With a self-build mortgage, lending tends to be capped to around 75% of either the total cost of the land and building, or the final valuation of the property, but this may vary between lenders and between repayment and interest-only mortgages. The LTV may also be different for the land and the building parts of the loan.

A broker with expertise in self-build mortgages for prefab properties will be able to advise you here to make sure you get the best deal.

How popular are mortgages for this type of property with lenders?

Although it is seen as a riskier option, there are lenders out there who will be willing to finance prefab homes, and as the industry grows, so too will finance options.

When looking at loans for non-standard construction properties, lenders often give more weight to feedback and comments from the surveyor/valuer than they normally would, because they don’t have the same level of understanding of this type of property. This means that mortgages on prefab houses are looked at more on a case by case basis, and getting an experienced and knowledgeable surveyor/valuer could make all the difference.

If we look to more progressive countries like Sweden as an example, the prefabricated home industry is booming, accounting for around 45% of all new housing. Although the UK is some way behind this, prefabs are increasingly being seen as an affordable and sustainable solution to our housing crisis. If prefab housing becomes more mainstream and industry wide standards or quality marks are introduced, then lenders should feel more inclined to follow the trend.

Repaired versus unrepaired prefabricated reinforced concrete

A lot of the early post-war prefabs were built from prefabricated reinforced concrete (PCR) and many were later found to have inherent structural defects. Various licensed schemes were brought in to facilitate the repair of these homes and to be acceptable to lenders, a property would have to have been repaired under an approved scheme. If it’s semi-detached or terraced, then most lenders will want adjoining properties to meet the same criteria. Very few lenders will be prepared to lend against unrepaired PCR homes.

How to make your prefab house more mortgageable

Because lenders are more cautious around non-standard construction properties, anything that you can do to smooth the process will be useful.

One way to do this is to look for a local surveyor who has specific experience in approving prefab homes for lenders. They can help you with common issues and questions and may be able to reassure mortgage providers about any perceived risks.

If you’re set on a prefab but have flexibility on location, look for an area where there are already a lot of prefabricated homes. This will mean that lenders have more knowledge of the type of property you’re looking to buy or build and so may have more of an open mind.

Maintenance is key with prefab homes, so if you’re thinking to the future and remortgaging or reselling then keep a keen eye on any potential issues and make sure you’re on top of regular maintenance.

Get matched with a specialist broker for prefab house mortgages

The best way to find a mortgage for a prefab house is to use a broker who specialises in that market. With their expertise, experience and contacts you’ll be able to find the lenders who are best suited to your circumstances and secure the best possible rates.

Our free, broker-matching service will look at your individual requirements and circumstances and match you with a mortgage advisor who has a strong track record and specific expertise in finding mortgages for prefab houses.

Call 0808 189 0463 or make an enquiry and we’ll set up a free, no-obligation chat between you and a specialist mortgage broker today.

FAQs

Can I get a mortgage on a park home?

No. Although park homes are a type of prefabricated home, they are not bought and sold in the same way as the land that the home sits on is owned by the site owner and not the homeowner. Mortgages are secured against a property owner’s title on the HM Land Registry. With a park home there is no formal title registered with the Land Registry, so there’s nothing for the lender to secure the mortgage against. Occasionally a park home may be sold on freehold land, but this is the only time when a mortgage might be possible.

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different Property Types. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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