Getting A Mortgage For A Prefab House
Looking to get a mortgage on a prefab property? It can be done! Read our guide to find out how this is possible.
Firstly, is the property a prefab construction?
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Prefab (short for prefabricated) houses were originally introduced in 1944 by Winston Churchill as a cheap fix to the post-war housing crisis. Whilst many older PRC (precast reinforced concrete) houses were condemned as defective in the ‘80s, modern-day prefab homes paint a very different picture.
As a quick-to-build and often architecturally stunning housing option, the demand for modern prefab houses is on the rise. In this article, we’ll explain how to secure the finance necessary to buy one, and the role brokers play in helping you achieve your unique home ownership dreams.
Can you get a mortgage on a prefab house?
You can absolutely get a mortgage for a prefab house, however, it may be more difficult than it is to get a mortgage for a typical brick and mortar property. There are two major reasons why it can be more difficult, depending on the age and style of prefab you’re planning to buy.
- Many PRC homes have lasted far beyond their 10-year expected shelf-life, however, walls made from concrete are liable to crumble and crack eventually, so lenders are likely to be much more cautious lending on this type of home, particularly those that appear on the list of defective designs in the Housing Defects Act.
It can also be difficult to obtain insurance for this type of property, and buildings insurance is an essential element of many mortgage approval processes.
- Newer prefab homes are typically constructed with more modern, durable materials, however, they are still considered non-standard construction properties, meaning that certain lenders won’t consider them. This is because non-standard construction properties are more difficult to maintain, insure, and could potentially have less resale appeal
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What is the eligibility criteria?
As outlined above, lenders exercise more caution with prefab mortgages due to the increased risk involved, to balance that risk, you’ll often need to meet specific criteria in addition to the standard affordability and creditworthiness.
This will usually be:
- Providing a larger deposit – The percentage of deposit required will vary between lenders, and depending on the property itself, however, anything from 25% to 50% is possible.
- Certification and guarantees – the vast majority of lenders will need a PRC home to have been repaired under an approved scheme and have a certificate to prove this.
How to make a prefab house more mortgageable
The good news is that there are steps you can take to improve your chances of mortgage acceptance on a prefab home, depending on the type of property you plan to buy.
If you’re buying an existing prefab house that’s a little older:
- Obtain a RICS (Royal Institute of Chartered Surveyors) home buyers survey and building survey before approaching the lender, this will give you a clear picture of the quality of the property, whether it’s a model that’s included on the list under the Housing Defects Act and prevent potential disappointment later in the process.
- Look at a copy of ‘Non-traditional housing in the UK – a brief review’ as mortgage lenders use this as a guide to inform them about non-traditional construction.
- Obtain a PRC Completion Certificate. This confirms that the property has been reinforced to a standard of safety that a structural engineer approves. Lenders are typically much happier to lend on a property where this improvement has been carried out.
If you’re buying an existing modern prefab or having one built:
Modern prefab houses, whilst still considered non-standard construction, are far more likely to have been completed in adherence to the latest building regulations and with modern methods of construction (MMC).
This means that lenders should have fewer concerns about structural safety, and to some degree, resale potential. That said, there are certain steps you can take to improve your chances of securing a mortgage.
- Employ a surveyor with experience in prefab homes, as their advice can often go a long way to minimising lender concerns.
- Buy in an area where prefab homes are more prevalent. Lenders that focus on these geographical locations are likely to be more comfortable lending in these circumstances.
- Look for ecological benefits. There is an increasing drive for UK homes to be eco-friendly, and there are a range of green mortgages specifically available for properties that tick certain boxes in terms of energy efficiency. Prefab homes are generally more energy efficient due to their construction, so it will be easier to meet the eco home criteria.
If you’re planning to build your own prefab home, you have even more opportunity to include eco elements at the design stage. This can make it easier to obtain a self-build mortgage.
- Get BOPAS certification. Buildoffsite (BOPAS) is a joint initiative between the Royal Institution of Chartered Surveyors, Lloyd’s Register and Building LifePlans Ltd, in consultation with the Council of Mortgage Lenders and the Building Societies Association. It provides lenders a guarantee of durability and saleability for a minimum of sixty years.
The scheme is expected to make it easier to secure mortgages on prefabricated homes in the future, as it gathers more industry support.
How a specialist broker can help with a prefab mortgage
A broker with knowledge and experience in the area of securing finance for both new and existing prefab homes will make the entire process less painful. As well as being able to help you achieve the steps mentioned above, not to mention potentially suggesting more, they will also know which lenders to recommend for any given situation.
Depending on the type of home you’re planning to buy (or build) they’ll be able to match you with a lender with suitable criteria. Regardless of the age or quality of a prefab home, it will always be classed as non-standard construction, so this will already narrow down the pool of lenders available to you.
Within that pool, each will have specific criteria, meaning that some lenders will accept properties that others would not. The lenders that we work with offer a bespoke service, so the advice and lender recommendations they provide will be based on your precise circumstances. Contact us to find out more and speak to the right broker for your needs.
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What type of mortgage would be best?
There are a couple of mortgage types that would be suitable for prefab homes, but which one’s the most suitable would depend on whether you’re buying or building one, and which criteria you’re able to meet.
There are plenty of lenders in the non-standard construction niche that are willing to provide standard residential mortgages for prefab homes, so long as both the borrower and the home are able to meet certain criteria, which we’ll look at in more detail later in the article.
If you’re buying a fairly recently built prefab and are able to meet the criteria for a green mortgage, this could be a good option, as often the rates are more competitive.
Whilst the actual construction required on some of these buildings is minimal, you’ll still require a self-build mortgage if this is the route you’re taking. There are fewer lenders available in this niche than there are offering standard residential mortgages, however, with the right advice, there are plenty available.
There are also specific green mortgages in the self-build market, so it’s certainly worth considering those eco-friendly building materials and construction methods.
If you’re building your own home, a bridging loan could be an alternative to a self-build mortgage. Although lending on prefab housing purchases is still quite niche in this industry, there have been definite steps taken in the industry to offer more flexibility when it comes to lending on modular constructions. Having a (BOPAS) guarantee may also add credence to your application with bridging lenders.
Read our guide to bridging finance to find out more.
How much can you borrow?
The amount you can borrow will depend on your affordability, which each lender will calculate differently, however, the below affordability calculator should be able to provide some guidance on what you may be able to borrow based on your household income.
Mortgage Affordability Calculator
Our affordability calculator can tell you how much you can potentially borrow from a mortgage lender. Simply enter your total household income below and our calculator will do the rest.
You could borrow up to
Most lenders would consider letting you borrow
This is based on 4.5 times your household income, the standard calculation used by the majority of mortgage providers. To borrow more than this, you will need to use a mortgage broker to access specialist lenders.
Some lenders would consider letting you borrow
This is based on 5 times your household income, a salary multiple you might struggle to qualify for without the help of a broker. This income multiple is not widely available to customers who are applying directly with a lender.
A minority of lenders would consider letting you borrow
This is based on 6 times your household income, a salary multiple you will struggle to get without a broker. Six-times salary mortgages are usually only available under very specific circumstances.
Get Started with an expert broker to find out exactly how much you could borrow.
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Which lenders can you use?
The lenders available to you will be limited and depend on the type of prefab home you’re buying, particularly for PRC homes that have not been structurally reinforced where the maximum LTV (loan to value) is typically 50%, meaning you will need a very large deposit.
If you’re buying a more modern prefab building, or a PRC property with the proper structural enhancements, there will be more lenders available to you. For example, NatWest and Halifax are both willing to consider prefab homes on a case-by-case basis, assuming the walls have been completely rebuilt in traditional materials and PRC Homes Limited have issued a guarantee that the property, or all houses in the structural block, where applicable, have been improved to this standard.
In fact, most lenders in the market are happy to lend when there is a certificate of guarantee for the PRC available, however, the length of guarantee requirement can vary from one lender to the next. Typically this ranges from 30-60 years, however, some lenders do not dictate a minimum.
Of course, there will also be some differences in lenders depending on whether you’re buying an existing home, or opting for a self-build mortgage. Ipswich Building Society will consider prefab self-builds if MMC are used.
Both self-build homes generally, and buildings of non-standard construction typically attract higher rates of interest, given that lenders are taking on more risk in lending, so expect higher than the market average interest rates whether you’re building or buying a prefab home. You may be able to minimise the impact of such rates if you qualify for a green mortgage, however, and of course, an experienced broker will ensure that you attain the best rates for your circumstances.
Speak to a broker about a prefab mortgage
There is a substantial increase in interest in modular homes in the UK, given that this offers a relatively cheap and simple path to unique home ownership, however, securing the right finance can be a complex matter.
We work with a wide range of experienced brokers across the country, including those with experience in securing mortgages for prefab homes. Whether you’re looking to buy a repaired PRC home, modern modular property or to build your own prefab housing, use our free broker matching service to find an expert with the right experience to help you.
Simply call 0808 189 2301 or make an enquiry and we’ll make sure you start off on the right path.
Speak to a Property Types expert
Maximise your chance of approval with a dedicated specialist broker
Yes, although as it’s more likely to be PRC, you will probably need to arrange for the suitable repairs and certification to be carried out, if the council has not done this previously. You should be able to find out through your local authority about which properties have been repaired.
Although historically prefab homes are known to lose value over time, the more modern modular homes with greater energy efficiency and more robust materials can actually maintain their value, and potentially even appreciate in value, if well maintained. The location and style of the building can also have a significant influence on this.
No you can’t. Homes on a permanent park plot are similar in construction to mobile prefab homes, however, as there are no formal titles registered with the Land Registry on this type of property, they are not considered mortgageable.
There are no current schemes intended to help buy this type of home specifically, but as the government are keen to promote prefabricated homes as a cost-effective answer to the growing housing crisis, they are in the process of designing one. It’s also likely that ownership of this type of home may be encouraged through existing schemes, such as shared ownership.
The push for greener homes and commitment to increasing eco-home ownership is also a driving factor for more modular homes, and it’s expected that they will become increasingly easy to finance in the future.
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