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The first face-to-face meeting of the CHBA Factory-Built Modular Construction Council will take place on May 8, 2017 in St. John's, NL. Registration details will be posted soon.

 

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Thinking of Buying?

Posted: 
November 12, 2013

 

by Lance Sosnowich

You’re thinking about buying a manufactured home and you’re probably experiencing a lot of different emotions. You want to make sure you make the right decisions. But there are so many decisions to make—especially when it comes to home financing. The key to being prepared is learning about your options.

What is a manufactured home?

Simply put, a manufactured home is a single-family dwelling built in a factory certified in accordance with Canadian Standards Association specifications.

Determining what you can afford

Everything depends on how much you can afford. Securing a pre-approved mortgage lets you focus on what really matters: choosing that perfect home. With a pre-approval, you know exactly what you can afford, how much you can borrow and how much your payments will be. There are different borrowing options available depending on how much of a down payment you can afford and whether your manufactured home will be permanently affixed to a foundation. If your manufactured home is permanently affixed to a foundation, standard mortgage financing options are available.

A conventional mortgage requires a down payment of at least 20%. Conventional mortgages have the lowest carrying costs because they do not require mortgage default insurance. A low-down-payment mortgage requires a minimum 5% down payment and must be insured to cover potential default of payment. As a result, its carrying costs are higher than conventional mortgage carrying costs because they include the mortgage default insurance premium. The premium can either be paid up front or added to the amount you borrow. If your manufactured home will not be permanently affixed to a foundation, a slightly different financing option known as a “chattel mortgage” is available. A chattel mortgage can provide many of the advantages of a traditional mortgage, such as amortizations of up to 25 years at today’s competitive rates, while still being considered a personal loan. A chattel mortgage must be default insured. The loan is secured with a lien against the moveable asset and is registered according to the applicable provincial personal property legislation. It remains in effect for the duration of the loan.

Mortgage rates and amortization

A fixed-rate mortgage offers you the security of locking in your interest rate for the term of your mortgage. Your payment amount will stay the same, providing ease of budgeting. Its main advantage is that the interest rate stays the same during the term of the mortgage and you know exactly how much of your payment will be applied to the principal and interest. With a variable-rate mortgage, your payments remain the same, regardless of fluctuating interest rates. When rates go down, more of your payment goes to pay the principal and less to pay interest, enabling you to pay off the mortgage sooner. Your monthly payment will remain fixed even if interest rates rise, as long as the amount is sufficient to cover the interest cost. Your amortization period is the amount of time it takes to pay off your mortgage. Customize your amortization period depending on how much you can afford. Paying off your mortgage sooner saves you interest costs; a longer amortization period reduces your regular payment amount.

Ready to get started?

Becoming a homebuyer and applying for financing can seem overwhelming. Doing some research up front will help you choose the home and financing that is right for you.

For more information on financing your manufactured home purchase, visit Canada Mortgage and Housing Corporation at cmhc.ca. Speak with a registered Manufactured Housing Consultant (MHC)® in your area (a list is available on the Canadian Manufactured Housing Institute website at cmhi.ca), and make an appointment with a mortgage specialist at your financial institution to go over the options available to you.

Lance Sosnowich is National Manager, Builder and Construction with RBC Royal Bank