Guide
Modular build finance compared with a construction loan
1 goal, a finished home, built 2 different ways.
A standard construction loan pays for a home as it is built on the borrower's land, in stages inspected on site. Modular build finance pays for a home as it is built in a factory, in stages an independent quantity surveyor certifies, with the home itself as security until it is installed. Here is how the 2 compare, side by side.
Side by side
| Feature | Typical construction loan | Modular Build Finance |
|---|---|---|
| Where the home is built | On the borrower's land | In the builder's factory, then delivered to the site |
| What each payment is for | A stage of work done on site, such as base, frame, lock-up, fixing and completion | A finished factory stage: order, frame, fit-out, delivery and handover |
| Who checks each stage | The lender, usually through a progress inspection | An independent quantity surveyor, against the plans and the build schedule |
| What secures the loan | A mortgage over the land and the home being built on it | The home itself, registered on the Personal Property Securities Register, every director's guarantee, a director's property, and the land or a site deed |
| The land | Owned by the borrower | Owned by the borrowing company, or leased or licensed with a site deed |
| During the build | Interest on the amount drawn, usually paid monthly | Interest added to the facility, with nothing to pay until handover |
| After the build | Becomes a standard home loan | A principal and interest loan of up to 10 years from handover |
| Who borrows | Usually people building a home of their own | Australian companies and super fund company trustees that own and rent the homes |
A construction loan suits a home built on site, on land the borrower owns. Modular build finance suits a home built in a factory, on land the borrowing company owns or leases, to rent out.
What is changing for factory-built homes
Lending for factory-built homes is moving. Commonwealth Bank now pays up to 80% of the build contract price while the home is built off-site, for manufacturers it has assessed, with the land as its only security until the home is transported to site.
Victoria has proposed letting builders take a deposit of up to 20% where most of a home is built off-site, up from the 5% cap that applies now. Queensland and Western Australia already allow 20% where more than half of the contract value is completed off-site.
The Commonwealth is putting $54 million into prefabricated and modular home construction, including $4.7 million for a voluntary national certification process for off-site construction (Treasury, 25 March 2025).
Homes on leased land are still the hard case, because most home lending needs land ownership. Services Australia, for example, says land lease communities can't be used as security for its Home Equity Access Scheme, and brokers report that movable homes may need chattel loans (Home Loan Experts). Woolong's answer is to take security over the home itself, with a site deed from the landowner.
Questions to ask any lender about a modular build
- Will you pay for work done in the factory, before the home is on the land?
- Who certifies each stage, and how soon after is the builder paid?
- Can the home stand as security on a leased or licensed site?
- Do repayments start during the build, or at handover?
- What happens if the home needs to move?
For Woolong's answers, see the full terms and how modular build finance works.
Questions people ask
Can I use a construction loan for a modular home?
Some lenders fund modular homes on land the borrower owns, often limiting what they pay before the home is on site. Ask how the lender pays for work done in the factory, and what it takes as security before delivery.
What if the home will sit on leased land?
A home on leased or licensed land can't be offered as a mortgage over land the borrower owns. Woolong takes security over the home itself, registered on the Personal Property Securities Register, with a site deed in which the landowner agrees the home stays removable.
Who can borrow from Woolong Capital?
Australian proprietary companies, and self-managed super funds with a company as trustee, that will own and rent the home. Every director guarantees the loan.
Sources
- Commonwealth Bank, Prefab home loans, read 20 October 2026
- Victorian Government, Regulatory Impact Statement, Domestic Building Contracts Amendment Regulations 2026, August 2026
- Treasury ministers, Building more homes, more quickly, 25 March 2025
- Services Australia, What you can use as security for a Home Equity Access Scheme loan, updated 30 June 2025
- Home Loan Experts, Prefab house loans, updated 27 April 2026
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