What you need to know about display home loans

Most lenders won’t let you take a home loan on a display home. Still, you can finance this type of property in several ways.

A walk down a boulevard of display homes can fill any potential first homebuyer with ideas and a sense of opportunity. Not only do these homes look so clean and shiny, with so many desirable features, they’re often much more affordable than properties in more established suburbs. Building companies generally build display homes in outer city suburbs to show off their design concepts and expertise. They are often packed with every feature on the glossy brochure to entice homeowners with a block of land to choose their vision. But the homes themselves are often very attractive to investors and new homebuyers. Yes, a display home may be a more affordable investment than other types of properties. However, getting finance for a display home isn’t always easy. Most lenders take a conservative approach to financing the purchase of display homes because of the leaseback arrangement that most builders use as part of any sale offers less flexibility for the buyer (and the lender). Some lenders, for instance, don’t accept display homes as security for a loan.

What is a display home?

Many building companies in Australia use display homes to showcase their house design proficiency. They often fill these homes with top-end features to show potential new buyers what they may get if they choose a house “with the lot”. These are often their best, fully customised examples. Builders may create whole display home villages to present designs and house plans. Other display home villages bring together the creations of multiple builders, all in one convenient location. Many display homes are bought under a leaseback arrangement. This dictates the terms under which you buy a home and lease it back to the builder while it is being used as a display property. Effectively, you are the investor and the builder is the tenant. At the end of the leaseback agreement, you can choose to make the home your permanent residence or continue as a landlord by finding tenants for the property. Leaseback arrangements are generally no longer than 24 months but may have terms and conditions specific to that property and display village.

Why don’t lenders approve loans for display homes?

  • The rental agreement is significantly more expensive than competitive market rents. It may be difficult to maintain a rent level once the leaseback ends.
  • The leaseback agreement favours the builder or is over a long period – lenders may have little control over the property if things go wrong.
  • If the builder cancels the lease, finding new tenants can be difficult. This is especially the case if the house is part of a display village and many of the houses are empty.
  • Difficulties may arise if the builder defaults on the lease. Even if the lease seems safe, it’s important to consider all possible implications. Ask your solicitor to find out more about this.

Benefits of buying a display home

Builders sell many, if not most, of their display homes. This is not surprising, considering a display home has several benefits:

  • They often look better than older homes on the market. Since nobody actually lives in a “display” home, it tends to look better than many of the properties on the market. Also, builders usually put effort into making sure their display properties look good enough to sell.
  • They include high-end materials. Many builders create display homes to highlight top features and amenities. They use high-quality materials and features that are sometimes not seen in other newly built homes.
  • They might come with a built-in discount. Display homes often sell for less than their market value. Most of the time, builders want to sell them fast, so they can invest their money in other projects.
  • You get to buy a new home sooner. Investing in a ready-made display home is faster than building a similar home on a vacant plot of land. It can also be less stressful because you can see what you’re buying.

Drawbacks of buying a display home

  • You can’t choose the location of your display home. If you want to buy it, you may have to live in a display village. While you might be living in a good area, some or most of the properties around you could be vacant for some time.
  • The display home may have been used for several years already. Even if nobody has slept in it, it may still show signs of wear.
  • The home may not be built to an ideal standard or lacks certain features that you might think are essential. This can happen when builders rush to finish the homes in their display villages. How much can I borrow?Use UNO's calculator to estimate your borrowing capacity. Calculate Now ### Display home loan approval factors The lending approval criteria for display homes can be extensive. However, most of deciding factors are related to the leaseback agreement where the builder is the tenant. Here are the key approval factors:
  • Leaseback to the builder: Some lenders won’t finance a display home until the leaseback has ended and the property is available to new tenants.
  • Two-year lease: To get 75% to 80% of the property value through a loan to value ratio (LVR) loan, the leaseback term should not exceed 24 months.
  • Rental income: You can only get 90% LVR home loans if you don’t need the property rental income to afford the loan. Also, to qualify for this, the lease should expire within six months.
  • Bank guarantee from builder: This is often required for a home loan on a property in a display village. You may be able to secure this type of loan if you don’t need to rely on rental income.

How much can I borrow for a display home loan?

The amount you can borrow depends not only on your lender but your credit history. The value and location of the property matters, too. The most important consideration is the leaseback agreement you may be forced to enter with the builder. This gives the builder the right to continue to show the home for a guaranteed rental return. The usual period is less than two years. The more restrictive the leaseback arrangement is, the more difficult it could be to find a lender. This might limit the number of home loan options you have available. Indeed, many major lenders aren’t willing to lend money for display homes that have a leaseback arrangement. Likewise, lenders don’t offer low doc loans for display homes because of the number of factors that come into the deal. Many would see any arrangement involving a leaseback as high risk. An alternative may be to get a guarantor loan. This is where a guarantor offers their own property (or properties) as security for the loan. This guarantor, who is usually an immediate family member, may also contribute additional income to help you pay off the loan. It may also avoid the need to pay Lenders Mortgage Insurance (LMI). You can read more about guarantor loans here.

What to do next

UNO home loan advisers can help you finance a display home. Whether you’re a first homebuyer or investor, we can provide home loan comparisons and more: Use our loan calculator to learn how much you need to borrow Compare home loans to find the most suitable one for you Talk to an expert about display home loans to better understand all your options. Book in a quick call with our customer care team.This information is general in nature and you should always seek professional advice when making financial decisions. Book a call in with UNO

5 stars for our service reviews from clients

Book Call Now

UNO home loans

Try Plans, by UNO
Mortgage calculators completely reimagined
Get Started
Considering a purchase or refinance?

Try Plans by UNO

Mortgage calculators completely reimagined
Get Started
☎️ 🚫 No cold call promise

Related Articles

TESTIMONIALS

What our customers are saying

Sheree Tidswell
February 20, 2025
5 stars for our service reviews from clients
Scott Wilkinson and the team at Uno Mortgages were exceptional to work with. They were proactive, took the initiative at every stage, and kept us well-informed throughout the process. Their patience and relaxed approach made everything feel seamless, and we truly felt supported in achieving the best outcome for our needs. We highly recommend Scott and the Uno team for their professionalism and dedication!
Read more
Jaio Seto
February 19, 2025
5 stars for our service reviews from clients
Paul is great to deal with, he made the whole process super easy!
Read more
Ankur
February 12, 2025
5 stars for our service reviews from clients
Shelley and the team at UNO Home Loans have been amazing to deal with. The process has been very smooth. I would highly recommend their expertise.
Read more
Rich N
February 6, 2025
5 stars for our service reviews from clients
Mike Parsons was so good. He went in to bat for us with the bank and the valuers and everything went smoothly, eventually!! - One is always waiting for banks it seems... Mike gave us clear and concise information and time-frames during the whole process and was super friendly and way to deal with. Highly recommend Uno and Mike.
Read more
Baron Wills
January 21, 2025
5 stars for our service reviews from clients
Scott was referred by a mate of mine whom I've known for years back in Novemberof 2024. Shared my goals and what my ideal outcomes were and had one of the quickest and easiest turnarounds I've ever experienced thanks to Scott. He was easy to work with with allowed me to go at my own pace. When I had questions Scott took the time to help me understand in a way that made sense to me. We finalised our transactions a month later and settlement couldn't have been more easier. Thank you Scott and his amazing team at Uno home loans. I highly recommend and will be looking to partner with Scott and his team again on my next investment loan.
Read more
Theresa Liebenberg
January 15, 2025
5 stars for our service reviews from clients
Paul Davey was our mortgage broker for the purchase of our first home in Australia. We were very anxious about purchasing a home less than one year in the country. Paul's initial consultation was great and we did not even consider any other avenues. Right through the process, he kept us informed and utilised whatever additional expertise from Uno to get us an approved mortgage. Straightforward and efficient! We highly recommend Paul and Uno for the purchase of your new home. Theresa and Johan
Read more
Mark
January 10, 2025
5 stars for our service reviews from clients
We were recently approved for finance with Scott Wilkinson at UNO Home Loams. Scott was friendly and professional the whole way through the process and obtained the finance for us when many others had said they wouldn’t be able to. Thanks to Scott we were able to get everything done and settled in quite a short amount of time considering the complexity of the deal. We knew where we stood the whole way and no details were hidden or forgotten . Thanks Scott you are highly recommended by myself and my Wife.
Read more
Lise Ioane
December 30, 2024
5 stars for our service reviews from clients
Paul Davey and the team were amazing! As Kiwi's who have moved to Australia I wanted to use someone back home or who had experience with helping FHB in Australia. Paul answered all of our questions in a timely manner and helped us to secure the home loan and move into our new home. We had a few meetings with Paul and he did all the the work so us, we just filled in the required paperwork and he and the team did the rest. We dealt with Dalby for the last part of the process and he was also amazing! Highly recommend Paul and the team! Thanks Paul, Dalby and the team and UNO Home Loans.
Read more
Neil Venkataramiah
December 20, 2024
5 stars for our service reviews from clients
Mike Parsons: Working with Mike was amazing. My wife and I were a couple from Sydney that had a 7 year stint overseas. On moving back, our loan had gone from Interest Only to Principal and Interest. The challenge: to get 2 recently re-patriated Aussies on an Interest Only loan. With only 1 year of Oz financials. And with income from an overseas company. We had equity in our property, but the ability to service was the issue. A very tough brief. Step in Mike. He contacted all his lenders, knowing that this was a unique situation. He never let up and followed through with calls and whatsapps at every stage of the process. We simply could not have got our Interest Only loan if it wasn’t for Mike. I highly recommend Mike for any loan or re-finance that you’re looking at. His attention to detail and ability to find creative solutions is second to none. And most importantly - he's a good guy that will guide you through the whole process in what can be a stressful time. Steph and Neil
Read more
Philip Smith
December 20, 2024
5 stars for our service reviews from clients
Mike Parsons provided my wife and I outstanding service for our home loan. I have never dealt with someone who is so helpful and goes the extra mile and provides such excellent service the way Mike did. Highly recommend Mike as your broker for all investment/home loans you won’t be disappointed.
Read more
Gemma Smith
December 19, 2024
5 stars for our service reviews from clients
Mike Parsons was truly amazing when he organized our home loan. He offered service that far exceeded my expectations. He was on top of everything and was very organised. He has a true “do it now” attitude and ensured everything ran smoothly. He went above and beyond to make sure everything was in place. He was always contactable (even when he was on holidays!). Keeping us up to date at every step and his communication was great! Would VERY HIGHLY RECOMMEND Mike!
Read more
Stéphane Aumont
December 19, 2024
5 stars for our service reviews from clients
Highly recommend Mike - great service, very responsive and helped us through the whole process from product selection, approval all the way to settlement. Mike is supported by a great team at UNO
Read more