Financing factory-built houses depends on a number of variables, with the most important being whether you are situating the house on land you own, or land you lease such as in a Land Lease Community (a.k.a. mobile home park). When you own or will own the land, there are many competitive mortgage lending options. For leased land, the lending options are fewer, generally more expensive. If you are looking for a loan for a mobile home on a rented/leased lot, sorry to say but - as mortgage brokers - we currently have NO lending options available. For owned-lot financing, please continue reading.
Your financing options will depend on:
For all intents and purposes, if the land is owned, the home is or will be on a permanent foundation with full utility connections, its in good condition, and in an acceptable location, then the "normal" lending rules apply. If the home is also on an acreage, then acreage lending rules will apply too. If the home is your summer lake property, then cottage lending rules apply also, etc.Under the Canadian lending current rules, a borrower can no longer refinance a CMHC-insured loan. Most lenders require CMHC insurance for rural communities and certainly I can't think of a single bank lender who would lend on a mobile home in a park wthout CMHC insurance.
Contact us and we'll be happy to clear up any confusion and spell out your options.
The distinction and terminology used for the different types of factory-built homes can be confusing for consumers and other industry participants.
Modular homes are houses that are manufactured in sections or modules in a controlled, environmentally protected building centre or factory. The modules are then transported to the home site and permanently affixed together and to the permanent foundation, then the exterior cladding is completed. Once finally assembled, modular homes are essentially indistinguishable from typical site-built homes. If the home is CSA a277-certified, it means that the quality control procedures have been followed at the factory and that the home complies with the same building codes that would apply to a site-built home at the same final destination. CSA a277 is expected for mortgage financing.
Manufactured (Mobile) home:
Manufactured homes are one-story self-contained homes built on a steel frame, manufactured on either one or two sections (single-wide or double-wide), and assigned a serial number. They are movable from one location to another, then either placed on a foundation such as blocked wood and anchored to the ground, or more permanently placed on a foundation of drilled concrete piers, poured concrete pedestal, concrete block pedestal or anchored steel piles. Once on the foundation, the home is skirted. In the absence of an overriding CSA a277 factory certification program, mobile homes must be built to the CSA z240 MH building code standard. Some jurisdictions, such as Alberta, require CSA a277 factory certification regardless. (Check the electrical panel door for a compliance sticker.)
RTM (ready to move) home:
RTM homes are houses constructed in one piece in a controlled, environmentally protected building center. Transport of the finished home to the home site then occurs, where it is affixed to a permanent foundation. Once on the foundation, completion of a few outstanding items such as the heating system and stairs must be complete. Check that the construction is CSA a277 certified meaning it meets the local building code. This applies also to tiny homes.
Be clear, when you are leasing the land for your home, there is in fact no real estate, hence no land title to mortgage. The loan is therefore a secured "collateral loan" meaning only the building itself can be seized if you don't pay the loan, similar to a vehicle repossession. Interest rates will generally be 2-3% higher than a mortgage involving real estate. There may be alternative ways of financing these properties where other real estate can be used as security instead.
Often buyers are often attracted to manufactured homes in land lease communities for a variety of reasons. Factors like less yard maintenance, more personal space than an apartment, ownership benefits vs renting, location, and enhanced security in a gated community can be attractive. Some also perceive the lower price as an easier way to get into the housing market relative to the financing requirements for a traditional home on an owned-lot.
In terms of finance, in addition to the monthly loan payment on the home, you will also have a monthly lot rent payment to the park management perhaps in the order of $400-$500/month or more. Similar to a condo-fee or a home-owner-association fee, lenders will combine the loan and lot rent payments to calculate what you can afford for a loan approval. So in terms of affordability, a lender will view a $600/mo home payment plus a $400 lot rent payment as essentially equivalent to a $1000/mo mortgage payment on a house, as an example.
If you are considering a manufactured home in a land lease community simply because of a perceived lower price, let's compare that to a mortgage payment on a small house and to the concept of investment in general. Consider this:
If you are considering a mobile home in a park because you think it is cheaper, please contact us for a full evaluation. The results might surprise you.
As licensed professional mortgage brokers, we know exactly what it takes to qualify you for a mortgage and we do more than just get you a great mortgage at a great rate, we will show you the way, too.