Financing Modular, Manufactured, Mobile and RTM Homes

Do you or will you own the land?

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 (a.k.a. mobile or manufactured home park, RV resort, etc.). When you own or will own the land, you can get a "mortgage" and we may be able to help you, and  there are a number of competitive mortgage lending options. Please continue reading below the break.

Where you rent (or do not own) the land or lot, please contact a credit union or local bank directly and ask for a chattel loan, which is a loan secured by the home but not the land. You need to deal directly with a credit union to arrange a chattel loan.

For owned-lot financing in Canada, please continue reading.

To get a mortgage on a factory built home on land that you own, your financing options will depend on:

• Foundation type - is the home sitting on a foundation considered temporary, such as wooden blocks, or a more permanent foundation such as a cement basement, or cement footing? While the CSA z240.10.1 installation standard speaks to various acceptable foundation methods, it is important to understand that lenders have their own rule books. Many lenders require the home be fixed to a permanent foundation (not blocked) and the more permanent the foundation is perceived, the better for financing. For an excellent primer on factory-built home foundations from our friends south of the border, see this link.
• Age and condition of home - lenders look at the Remaining Economic Life ("REL") of all homes (site- or factory-built) before they agree to finance them. The general rule is, the maximum amortization available for a loan is it's REL less 5 years. So the newer the home, the easier it is to finance. Manufactured homes on steel frames (mobile homes) are perceived to depreciate much faster than other homes, and in that regard old mobiles in particular are extremely hard to finance, often with higher payments. Yes, today's building standards for manufactured homes are much higher than homes built pre-1992, however, in the absence of an appraisal or information indicating otherwise, the REL on a manufactured mobile home will be deemed by most lenders and CMHC to be 40 years less its age. A reduced amortization period on any property serves to increase the required monthly payment because the lender wants the home fully repaid while it still retains its value. This is a bit of a catch-22 where land is involved because the real value is retained in the land, not the home. A challenge for the re-sale home market, mobile or otherwise, is the that the maximum amortization (REL) rules and calculations drive the resale value of the homes. If a buyer can't afford a higher monthly payment then the only other thing to give is to reduce the total loan amount available. Less available bank money means lower purchase price offers. 
• Type of home construction - is the home construction considered modular, manufactured(mobile) or RTM (see discussion bottom of page, each with different characteristics). Homes without steel frames get treated more like site-built homes.
• New or existing home - if you are moving the home soon to your location, and you need money first to acquire the land and/or for the foundation, you may need a special construction / progress advance mortgage for this situation, which we have. As a normal rule-of-thumb in the mortgage lending world, a buyer interested in residential acreage development needs to have about 1/3rd the total cost-to-complete a project in cash, so $150K for a $450K project. The cash would be required for vacant land down payment (30-50%) as well as the up-front deposits and payments required for the new home factory order, utility servicing, home site preparation, transportation, and setup. Buyer cash requirements vary depending on available credit offered by mortgage lenders, dealer, factory, and trades, but certainly this cash requirement, let alone the project complexity, is prohibitive for many buyers as it relates to developing an acreage with a new RTM home. 
• Down payment - as with many mortgages, when your down payment is less than 20% down, there are CMHC lending rules and requirements to meet, while 20% or above is considered conventional financing. Different rule books mean you might be more easily approved with one program vs another other. 

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. 

As it relates to CMHC-insured loans (under 20% down, CLIP loans, and some rural locations regardless), keep in mind that a borrower will likely find it difficult to refinance the home with a bank lender after the original purchase. So if ever you are in need of accessing the equity in your home (emergency, debt consolidation, improvements, etc.) it might mean you have to sell if you can't get the money elsewhere.

Thinking about how to develop land you own or want to purchase with a new RTM home? Please contact us. For differences between Modular, Manufactured/Mobile and RTM homes, please continue reading below... 

Differences between Modular, Manufactured/Mobile and RTM homes 

The distinction and terminology used for the different types of factory-built homes can be confusing for consumers and other industry participants.

Modular home:
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.

Ready to discuss your home financing plans, please reach out.