Lethbridge real estate - financing for mobile or manufactured homes
The reality is that financing for mobile homes or manufactured homes is not as easy to obtain as it is for regular new home construction, site build homes, or existing residential houses for sale. Getting a mortgage or financing on a mobile home or manufactured home can be a very time consuming and tricky thing to do. As a result there are very few banks, lenders, or mortgage brokers who want anything to do with it. It is often a lot of work. First time home buyers often do not know this information.
However, in Lethbridge Alberta we have 2 large factories which manufacture these modular or mobile homes and as a result we have a lot of local people who look towards these homes as an option. Often, the home buyers are attracted to these properties because they are advertised as starting at prices as low as $95,000 which seems very attractive compared to buying s $200,000 half duplex or a $250,000 single family home.
But lets compare apples to oranges (not apples) a bit more closely.
A manufatured home buyer must consider that these homes are typically placed on rented or leased lots in mobile home parks. The monthly cost of this rented land or pad in Lethbridge is around $400/month in most locations available. This monthly payment is not going into your pocket, not ever decreasing, and not ever building equity. It is gone every month as long as you live there. By comparison, $400 being wasted on lot rent is about equal to $500 being spent on a mortgage for borrowed money, with the exception being that at least on the mortgage some of the money goes to equity each month and it actually has an end in sight, even if it is 20 or 25 years down the road.
So how much is $500/month? Well on a 25 year mortgage, at the current lowest 5 year fixed rate of 3.5%, it is $100,000. Let me restate that so it makes sense. For the same price monthly as lot rent, you could borrow $100,000. So a $95,000 mobile home on a rented lot would have the same monthly cost as a $195,000 house or half duplex. Make sense so far?
Also, the other thing to consider is that if you are financing or expecting to get a mortgage on a manufactured home, it will not be at the same discounted mortgage rates that are available to many new or existing residential home purchasers. Instead, because manufactured homes are a less competitive financing market, the few lenders who will finance them only offer their posted mortgage rates with no discount. This works out to be often up to 2% higher interest rates. When this is calculated, the cost of buying a $95,000 mobile home is now substantially more than the previous example of a $195,000 half duples and is actually about the same as the cost to finance a $250,000 house!
So there you have the numbers. The monthly cost of purchasing a manufactured home is the same as a traditional house purchase.
$95,000 Mobile home = $250,000 residential home = $1250/month either way
There are still people for whom manufactured homes, mobile homes, or trailers are a reasonable housing option, but it is important to understand the financials and why financing them is different. Purchasing a manufactured or mobile homes often requires a larger percentage downpayment, money in place to move the home, or interim financing to have it set up on a lot.
Here is some information about the CMHC CLIP program which I use to finance manufactured and mobile homes in Lethbridge and Southern Alberta. If you are interested in learning more or speaking to an experienced real estate and mortgage financing professional BEFORE making a bad decision, get in contact with me. Robert May 403.330.3039 or at any of the methods mentioned elsewhere on this website.
Mobile/Modular/Floating Homes on Leased Land
Eligible under the CMHC CLIP program only. (As per CMHC's CLIP criteria outlined below)
- CMHC insurance is required regardless of the loan to value
- Maximum LTV 95% is permitted for fixed rate mortgages
- VIRM financing is available to a maximum LTV of 90%
- Maximum LTV of 90% on refinances
- CashBack Mortgages, and Special Offer Mortgages not permitted Posted Interest Rates only. No discretionary pricing available.
- Not assumable or assignable
- Properties must conform to minimum property standards for existing residential buildings
- 100% of the site/land lease payments must be included in the GDS ratio
Required Documentation for Mobile/Modular/Floating Home Mortgages
Copy of the site/land lease - Required at time of application to ensure it meets our requirements, prior to continuing with the mortgage request
The site/land lease must contain the following key points:
- Must be in favour of the borrower
- Must be signed by the landlord
- May be short term provided that it is a typical term for the area
- Must be assignable to the Bank and subsequent purchasers
- No restrictions as to the banks' access to the unit
- No restrictions or limitations on the re-sale of the unit (e.g. Purchase Price or type of Purchaser)
- Not re-negotiable at the landlord's discretion prior to the expiry of the term
Site Lease Agreement
- The Site Lease Agreement is a mandatory form which must be signed by the customer, the landlord and the Bank. The form will be provided by the Bank and only the Bank's form is acceptable.
- Copy of the site map showing the exact location of the mobile home of the site
- Copy of the Bill of Sale or Offer to Purchase
- MLS listing, if applicable
- Water potability certificate if not on municipal water supply
CMHC CLIP Program Criteria
The following criteria is required to be eligible for mortgage insurance under the CMHC CLIP program:
- The maximum amortization is 25 years.
- Limited to owner-occupied mobile, modular, or floating homes used as primary/principal residences only
- The site tenant(s), purchaser(s), and borrower(s) must be one and the same
- The maximum amortization of the mortgage cannot exceed the remaining economic life as determined by CMHC
- New mobile home units must be certified in accordance with the CAN/CSA-Z240 MH Series - 94 standards
- New modular home units must be constructed in a manufacturing facility certified in accordance with CSA A277
- New Mobile and modular home units must be set-up and anchored to meet local/provincial/territorial requirements or in accordance with CAN3-CSA-Z240.10.1-M94
- Mobile home units must be tied, blocked, and skirted
- Floating homes must be located in marinas or subdivisions designed for this type of housing and must not exceed three stories in building height
- Floating homes must be located in areas where the appropriate government approval is in place for year-round occupancy
- CMHC CLIP Program is not available in Quebec
Mobile/Modular Homes on Owned Land
- Eligible only with CMHC insurance CMHC insurance is required regardless of the loan-to-value
Note: Modular homes MAY be eligible for conventional financing provided: The home is built on a foundation (or slab provided the surrounding neighbourhoods are also built on slabs)
- The land is owned
- The property is owner-occupied Maximum LTV 95% is permitted for fixed rate mortgages
- VIRM financing is available to a maximum LTV of 90%
- CashBack Mortgages, and Special Offer Mortgages not permitted
- Discretionary pricing is permitted on the Fixed Rate Mortgage terms
Robert W May is a Real Estate Broker in Lethbridge Alberta, having now been in the industry for over 23 years. . He was also a licensed Lethbridge mortgage broker and financing expert with Canada First Mortgage of Calgary Alberta for the past 10 years. He is an industry leader always willing to help train and educate others in how to improve their business models for financial and personal benefit.