Moving house, in the literal sense
Ashlea Lynch and her partner, Staun Popham, were renting a former state house in Waterview, Auckland, when they decided it was time to buy their own place.
Then aged 25, they looked at a procession of uninspiring houses, all selling for more than $700,000 each, before deciding they needed a different approach.
They found a section for sale in Leigh, north of Auckland, for $246,000. ‘‘We knew this was the one and we had to have it,’’ Lynch says. ‘‘We quickly started researching our options for prefab homes, knowing this was the most affordable way to build.’’
The total cost of the threebedroom, two-bathroom Keith Hay home was $274,000, including a septic system and water tank, house moving costs and insurances. The property is now valued at more than $800,000. ‘‘This has opened up the opportunity for us to buy our first investment property much sooner than we had ever imagined and this is what we’re currently looking into.’’
While Lynch is happy with her first-home and sub-$500,000 mortgage, moving an existing house on to a section – whether it’s a prefab or a relocatable existing home – can be more challenging than some buyers expect.
Arranging a loan for a building that is yet to be moved on to a site can be difficult.
John Bolton, of Squirrel Mortgages, said banks had historically only wanted to accept a house as security for a mortgage when it was fixed to foundations.
But buyers of prefab houses usually need $200,000 or more before the project gets to that stage.
Lynch applied for a loan from both BNZ and Westpac, where she worked. ‘‘We did have a bit of a tricky time with banks not wanting to support our build due to a lack of security. If the builders went bust, our property would be on their property.’’
Westpac eventually agreed. The bank announced this week it will run a pilot scheme for finance for prefabricated houses.
The three-month trial will finance six prefab homes in Auckland and Waikato.
Chief executive David McLean said it was hoped the model would simplify the process. As it was, buyers were often left having to convince builders to take the risk they could get finance at the end of the build, he said.
‘‘Usually, any arrangement has involved the builder getting a large temporary overdraft over the course of two months and financing the build out of that, essentially using their own money.’’
Other banks are monitoring developments. ANZ said there was merit in finding an industry-wide solution. BNZ said it was developing an option. ASB said it assessed prefab lending on a caseby-case basis.
Lynch said she would recommend the process to other buyers. ‘‘I guess the only trouble now is finding a piece of land in Auckland that’s cheap.’’
An even cheaper option is to buy an existing house and move it on to a section. Houses are sometimes sold for as little as $1 by owners who want to clear a section to build new. Moving the house to its new location usually costs $20,000 or more.
Kim Wilson, a sales consultant at the Relocatable House Company in Te Puke, relocated a house on to her own property three years ago. She paid $27,000 for an 85sqm, three-bedroom house built in the 1980s.
After a half-new kitchen, new flooring, new bathroom, paint and a deck, it was inhabitable for about $200,000.
She estimated that the minute the house went on to piles it had 30 per cent equity. That rose to 50 per cent once the landscaping work was finished.
A relocatable existing house provided an opportunity for the owner to put more ‘‘sweat equity’’ into the deal than they could with a new house, she said.
Most need renovation and sometimes rewiring or reroofing.
‘‘It’s definitely a cheaper option if you do it right and do your homework first.’’
Anyone shifting a house needed to make sure the site was suitable, that they knew what sort of foundations would be needed, what drainage was necessary and what connections were available, she said.
Bolton said banks were even more reluctant to lend on secondhand homes.
But Wilson said borrowers often got around that by asking family or friends to provide a guarantee against their properties until the house could be placed on its new foundations and revalued for a new mortgage.
Bolton said buyers needed to be aware that there would be more factors to manage. Unlike a prefab that was built in a controlled factory environment by one team of builders, owners of second-hand relocatable houses would often have to manage a range of contractors working together to make the house habitable again.