Where a Modular Build's Payment Schedule and a Standard Construction Loan Pull Apart

Where a Modular Build's Payment Schedule and a Standard Construction Loan Pull Apart

General information for South Australian landowners only. This is not financial, credit, legal or accounting advice. What any lender will do is for that lender and your broker; the terms and effect of any contract or security are for an SA property lawyer; tax treatment is for your registered tax agent; whether a payment schedule is appropriate for your build is for your own advisers. Lending policies, statutory requirements and standard contract terms change over time and vary between institutions, so confirm the live position for your own project before you rely on anything here.

Two schedules, built on different logic

Construction lending is commonly structured to release money in stages as a house appears on a block, with milestones following the physical build and some form of confirmation that a stage has been reached before a release. Products and policies differ between lenders, so treat this as the general shape rather than as what any particular lender does.

The logic underneath is straightforward enough: the lender takes security over the land, and what the security documents cover and how they operate are matters for the lender and your lawyer. As work goes into the ground and up out of it, there is progressively more standing on that land, and lenders structure their releases around that. How a lender values any stage, and what it will release against it, are matters for that lender and its valuer.

Where substantial payments fall due for off-site manufacture before delivery, that logic fits less well, because much of the money is spent building something that is not on your land yet. The factory needs to buy materials, run a production slot and complete a dwelling before it leaves. From the manufacturer's side, that is entirely reasonable — they are carrying real cost. From a lender's side, that spending has not yet produced anything standing on the land it has taken security over — and what a facility's security actually covers is a matter for its own documents.

So the two schedules pull apart in the middle, and the gap has to be funded by someone. The question this article is about is who, and how that is established before you sign anything.

Where the gap opens

Read the two timelines against each other and the shape is visible:

• Site works and footings happen on your land, and look like a conventional early stage.
• Factory production is the divergence. Cost is being incurred somewhere else, on something that is not yet attached to your security.
• Delivery and set-down puts the dwelling on the land, so physical delivery happens as one event rather than progressively. How a lender's valuer assesses the site before and after that event is a matter for them.
• Site completion — connections, external works, finishes — behaves conventionally again.

The middle band is the one to plan around. What sits there is a supplier wanting progress payments against factory milestones, and a lender whose ordinary machinery releases against site milestones.

This is a structural feature of the delivery method rather than a defect in anyone's product. But it is the reason "which bank does modular?" is not quite the right question. The better question is how a particular lender treats the factory stage — and that is a question for your broker and the lender against your actual contract, not something to infer from a general article or from what worked for someone else's build.

The contracting rules, and which of them reach your arrangement

There is a second thing happening in the same gap, and it is worth understanding rather than assuming.

South Australian domestic building work is a regulated contracting environment. On the published general position, a builder must not demand or request payment unless it is a genuine progress payment in respect of work already performed under the contract, and advance payments and deposits are limited (source: SA Law Handbook — Building Work Contracts; CBS — Form 1: Your building contract, your rights and obligations).

Whether and how those provisions apply to a given arrangement — including a supply contract for a dwelling manufactured off site, which may or may not be structured as a domestic building work contract at all — is a question for your SA property lawyer against your own documents. It is worth asking precisely that question rather than assuming either that the protections apply automatically or that they do not.

Two things follow for a buyer:

1. What kind of contract am I signing? A supply agreement, a domestic building work contract, or a combination with different parts governed differently. Your lawyer answers this, and the answer bears on much of what follows.
2. What am I getting for money paid before the dwelling is on my land? This is the deposit-protection question, and it is a legitimate one to ask a supplier directly.

The questions worth putting to a supplier and a lender

The mismatch is manageable when it is identified early. It becomes expensive when it is discovered after a production slot has been booked.

To the supplier:

• What is the payment schedule, tied to which milestones, and how is each milestone evidenced?
• What protects money paid before delivery, and what happens to my position if the manufacturer fails during production? The general sequence when a builder fails mid-project is set out in when a builder enters liquidation mid-build.
• Who owns the module while it is in the factory, and when does title in it pass to me?
• What insurance covers it in the factory and in transit, and who holds it?
• Is any part of my payment held or protected, and by what mechanism?

To the broker and lender:

• How does this lender treat payments for off-site manufacture?
• What evidence does the lender require at each release, and who provides it?
• Is a valuation required at any point, and against what? A valuation coming in differently from expectations has its own consequences — see why the bank valuation came in low.
• What happens to the facility if delivery is delayed beyond an expected date?
• Do I need to fund the factory stage from my own resources, and if so, how much and for how long?

That last question is a significant input for your broker and lender when they assess whether the project is fundable in the shape you are imagining it. It is better asked before a deposit than after.

Why this compounds with the delivery constraints

A modular program has fewer, larger events than a site build, and the money and the physical delivery are locked to each other.

If delivery slips — because a route, a permit or a set-down constraint was found late — the funding assumptions attached to it slip too, while holding costs keep running. The physical constraints that most often move a delivery date are covered in can a module actually reach your block, and what a delay does to a project's numbers is set out in how to price a delay.

The same applies upstream. If the approval characterisation is still unsettled when production is due to start, either production waits or you are manufacturing against a consent that does not exist yet — see modular, transportable or relocatable. Which is the reason these three questions — approval, funding and delivery — are worth resolving as one set rather than in sequence by whoever raises them first.

Frequently asked questions

Will a bank lend on a modular home at all? That is a question for lenders and your broker, and policies differ between institutions and change over time. The more useful question is how a given lender handles the off-site stage, because that is where arrangements differ most.

Is paying a large deposit before delivery normal? Factory production incurs cost before the dwelling exists, but who funds that, and when payment falls due from you, depend on the supplier contract and the finance structure rather than being fixed by the method. What is appropriate in your case, what protects it, and what the applicable regulatory requirements are, are questions for your lawyer against your own contract.

Can I use a standard construction loan? Whether a standard product fits depends on how its release milestones line up with your payment schedule. That comparison — the two schedules side by side — is the exercise this article is asking for.

What if the manufacturer fails while my module is in the factory? Your position depends on the contract, on who owns the module at that point, on any protection mechanism, and on the insurance in place. Establish those before you pay, not after — and see when a builder enters liquidation mid-build for how these situations unfold.

Does the general lending picture for small developments apply here? Much of it does — how lenders look at a small project is covered in how lenders weigh a small development project. The modular-specific part is the off-site stage.

Who decides what, and where Cyberate PM sits

• Whether and how to lend, and against what evidence — the lender, with your broker advising you.
• What your contract does, what it protects, and when title passes — your SA property lawyer.
• What is insured, by whom, and when — your insurer or broker.
• Tax treatment — your registered tax agent.
• Whether the price and scope are right — your quantity surveyor (QS) or building consultant.

Cyberate PM does none of those. We do not lend, arrange credit, give legal or tax advice, or determine what is insured. We work owner-side: we put the supplier's payment schedule and the lender's release schedule on one page early enough for the gap to be seen, get the contract and finance questions asked together rather than months apart, and hold the program so the approval, the production slot and the delivery date are not each being set by a different party in isolation. What that role covers is set out in what a development manager actually does.

The one-page test

Put the two schedules next to each other before you commit:

• Supplier's payment milestones, with dates and amounts, in one column.
• Lender's release milestones, with the evidence required for each, in the other.
• Mark every point where a payment falls due before a release is available.
• Add those up, then test the result with your broker and lender against the facility terms. The apparent gap is the start of that conversation, not a conclusion about what you must fund.
• Then ask what protects each payment made before the dwelling is on your land.

If the answer to the last point is uncertain, that is the conversation to have — with your lawyer and the supplier — before a production slot is booked.

Lending policies differ between institutions and change over time, and statutory requirements for building contracts are amended from time to time. Nothing here describes what any particular lender will do. Confirm the current position with your broker, lender and legal adviser. Reflects publicly available material as at August 2026.

Sources

• SA Law Handbook — Building Work Contracts
• Consumer and Business Services — Form 1: Your building contract, your rights and obligations
• Consumer and Business Services — Rights and protections when home building
• Moneysmart — Loan to value ratio (LVR)