Buying a Display Home: How To Get Finance

2011 September 20
by admin

Investing in a display home can have many benefits! Instead of having a regular tenant that may cause you stress or damage the property, the builder who constructed the house sells it to you and leases it back off you.

This neat little arrangement can provide big rental returns.
Alternatively, purchasing a former display home to live in can also be great.

They generally have all the added extras that regular homes do not have and have less wear and tear.

So have you ever considered buying one? Need a loan to fund the purchase? Read on to find out how you can get approval.

What is a display home?
Display homes are houses in display villages which are constructed for the sole purpose of providing people with an idea of what certain homes will look like when completed. This means that those wishing to buy land and build on the block can visit a few display villages and builders and see which homes they like before committing to the construction process.

Who buys display homes?

Once a display home is no longer being used for that purpose, it may be re-sold. However, this usually does not happen for 5 years.

This is why display homes are typically purchased by investors who buy the property and then lease it back to the builder. This way the builder has made money from the sale and has that money to use on other projects, but still has the property to showcase.

Can I borrow to buy a display home?

If you have found a great home in a display village you may be looking for finance to purchase the home. However, some banks take a different view of this property type, making it difficult to borrow.

Although, there are some lenders who will approve your loan, provided you have the minimum 5% deposit and are financially stable.

That way, the banks can be sure that you will repay the loan.

How much can I borrow?

The loan amount that you will qualify for depends on the state of your finances and whether you have all the required documentation.
For first home buyers, the standard lending criteria for existing dwellings would apply. Investors can borrow up to 90% LVR.

Approval Criteria for investors

Banks have very strict lending criteria when it comes to display homes. Generally, most lenders will not allow you to borrow unless the lease contract has been drawn up and organized and there is a certainty that there will be a tenant.

  • If you are wishing to borrow 75-80% LVR than the lease can be no longer than two years.
  • Some banks allow you to borrow 90% LVR but at a slightly higher interest rate.

However, it largely depends on the state of your finances. Depending on the circumstances of your case, the banks may more flexibly apply policy. This means you may still get a great loan package and low interest rates. It’s all about applying with the right lender!

Positives and negatives of buying a display home

If you an investor, buying a display home can offer solid returns without the hassle associated with renting to other tenants.

If you are a first home buyer who wants to live in a housing estate and has found a great display home that is now for sale, it may be in much better condition than comparative houses that were built at the same time.

For this reason, buying a display home can be better than buying another existing dwelling. It may also have top end fixtures and appliances that other regular homes would not have.

However, a display home is located in a display village and for this reason it may not be the most ideal place to live. Any purchase should be considered carefully.

As when making any big decision, it is important to weigh these factors up to decide whether you should invest or purchase to live in a display home.

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