State Introduces 2% Low-Deposit Loan for Home Building

A new, low-deposit loan is making it easier than ever to build a home. 

A new loan product for modular builds in WA requires just a 2% deposit. Image: Getty

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As part of Western Australia’s state budget, which lands on 19 June, the state has announced a suite of new ways to help residents get on the housing ladder. 

A new, low-deposit loan that has just launched for Western Australians who are open to building could shake-up construction within the state – and deliver a big boost to one segment in particular. 

The new loan product, which requires just a 2% deposit, is for modular homes being built in WA.

Breaking down the barriers for modular building

A modular home – or prefabricated home – is one in which the majority of construction happens off-site, with the elements of the home fabricated in a factory. They are then transported to site for the final assembly and finishes. 

While an appealing option due to the speed at which modular homes can be constructed – the time saved amounted to as much as 23% according to one Mirvac study – they have historically been difficult to fund.

Most construction loans only deliver progress payments when certain milestones are achieved on-site. Without access to those payments, buyers are left having to stump up most of the cost of construction themselves.

Western Australia’s new loan product, which will be administered through the Keystart government enterprise, takes this into consideration, providing up to four progress payments to builders elements are completed off-site. 

In modular construction, most of the home is constructed off-site. Image: Getty

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It also takes into consideration how challenging it can be to find the funds to build a home while paying for existing housing costs. Under WA’s model, buyers will pay construction payments of just $400 per month throughout the complete period of the build.

It will be one of only a few products on the market to cater to building a modular home. Earlier this year, the Commonwealth Bank made changes to its construction loan product to help buyers in the prefab market access progress payments when building. 

To access WA’s loan, buyers must choose from a pre-approved prefab builder.

Mark Tomasz, Keystart CEO commented that the new product was intended to make modular housing a better and more accessible for Western Australians. 

Real Estate Institute of Western Australia president Suzanne Brown praised the move, noting that “innovative solutions are needed to help build affordable new homes”. 

“Modular homes can be more affordable and built more quickly than a traditional build,” she said. 

Ms Brown also noted this loan could be particularly attractive to buyers in regional areas, where it can be harder to find tradespeople for building and costs have risen significantly in recent years. 

Helping homebuyers purchase off-the-plan

Home building has been further incentivised in WA’s new state budget with a shared-equity model for off-the-plan homes. 

Under the $210 million investment, 1,000 shared equity loans will be available, with the State Government purchasing an equity share of up to 35 per cent of the home’s value, or a maximum of $250,000.  

The loan will only be available for purchases of new or under-construction apartments or townhomes. This program is expected to launch in September. 

Are you interested in building? Check out our dedicated New Homes section.