Financing Your Relocation Project
Richard Hutchinson explains how you can finance a relocatable house project.
1 February 2019
House relocation is a very simple (when done properly) and smart strategy for increasing your property portfolio and rental income.
Financing a house relocation project is often the first box to tick off on the list of requirements, but where do you start and how do you get finance across the line to see your house relocation project come to fruition?
How Is Finance For A House Relocation Project Different to Normal House And Land Finance?
Finance for a relocatable is not as straight forward as purchasing an existing property.
Like construction lending, there are several different stages to a relocatable house project, so it is important to have a clear plan outlining the steps and costs along the way.
Lenders tend to need a lot more information upfront and will often supply the funds in stages throughout the process.
How Much Money Will The Bank Lend?
This is the million-dollar question! And each scenario will generate a different answer depending on your circumstances.
For a relocatable home, the banks will generally lend 80% of the total project cost. This means that if you are not using an existing property as security, you will need to have at least a 20% deposit.
How Do I Burrow The Funds For The Property Before It Is Onsite And Connected To Services?
If you are lucky enough to have a property with some equity in it, it is as easy as topping up your existing loan to provide the funds.
For those who do not have another property that the bank can use, they may have to look at other financing options.
While many of the mainstream banks will not lend on the properties until they are connected on site, there are some non-bank lenders that are able to provide short-term funding or funding secured against other security types.
Will Second-Tier Lenders Cost A Lot more Than A Mainstream Bank?
Non-bank or second tier lenders exist to help fill the gap that the traditional bigger banks cannot fill, therefore they are a great option when relocating a house. While they often have higher interest rates, the important thing to remember is that they only need be a short-term option.
The end strategy is to always end with a major lender so that you are on the best possible rates for the long term.
Example: A 3% interest rate difference (from 7% with a mainstream bank to 10% with a second-tier financier) may cost you an additional $12,000 in interest each year on a $400,000 loan, but when broken down to a three-month project period it will only cost you an additional $3,000 for a considerable equity gain at the project end.
At The Relocatable House Co. we understand that it can be a bit overwhelming when it comes to financing your relocation project. It doesn’t have to be. We’re here to help and make it as simple as possible for you.
To help you best prepare for your bank manager or your mortgage broker, we cannot emphasise enough the importance of getting together a budget to cover off all the costs involved in a house relocation project.
Ask about our Pre-purchase Budget Checklist. Our Budget Checklist can be accessed via our Guide to Buying a House for Relocation on page 15 and 16.
To access the Guide visit our website, fill out your details and we’ll email you a copy.https://relocatablehouses.co.n... house-buyers/download-our-buyersguide/
If you would like further information regarding finance and how to best structure your relocation project, just give us a call on 0800 572 3771 or fill out our finance enquiry form on our website and we’ll put you in touch with a mortgage broker. https://relocatablehouses.co.n... finance-and-insurance/
Here’s to your house relocation success.
At The Relocatable House Co. we pride ourselves on the fact that we are a professional services firm in the house relocation industry. As a house relocation specialist, we can help you achieve your dreams of becoming a property investor, creating equity, sub-dividing your land and creating future income. Land research, project feasibility, house relocation, project management and architectural design services are all part of our expertise, enabling us to help you save money on demolition and bring you a step closer to your goals.