MANY FINANCING OPTIONS
We hope this article will help you understand the ways how to finance a modular home in Canada. Financing a modular home can be done in several ways. The options available depend on your level of credit, the size and value of your home. A home in Canada is usually financed through a line of credit or a mortgage. You would find these two options in most major Canadian banks and credit unions. The interest rates and terms differ between the two sources, and each option has its own appeal.
Your preferred bank or credit union will help create a solution that suits your needs. Your bank or credit union will offer rate and term packages, and generally the longer the term, the lower the rate. The maximum amount you are allowed to borrow depends on the value of your home, credit history and other factors.
At Best Buy Homes we’re happy to help with advice and questions and even recommend quality lenders who are specialists in modular home financing.
MORTGAGE
The cost of a new modular home is significantly less than the cost of a new site-built home. This means the down payment will also be much less. This is a great way for first time home buyers to get into the market with a solid home that is well built and economically priced. Generally, lenders will look for a 5-20% down payment, depending on approval.
Interest Rates
The rate on a conventional mortgage is determined by what’s known as the mortgage rate, which is the rate of return to the lender after calculating all the other costs of the mortgage, such as closing costs and mortgage insurance.
The interest rate is a reflection of the market as well as a reflection of your credit profile. Depending on the housing market will determine the average interest rate available for loans.
The better your credit score, the better rates you will get.
Interest rates vary, but typically are similar to what you would pay for a mortgage on a traditional home. Available terms on modular homes can extend as long as 25 years. A preapproval can be a great way to start the process and understand what your options are before selecting a home.
MAJOR BANK VS CREDIT UNION
The amount of paperwork that you have to go through when shopping for a bank or credit union can be overwhelming. We recommend shopping with a local lender or broker that will understand the ins and outs of modular home financing. We may also be able to provide contacts for brokers we have worked with on manufactured home financing in the past with success.
Major Bank
Banks treat modular homes a little differently than site-built homes. In some cases, a mortgage can be set up, depending on the bank and home you are looking to purchase.
The Major Canadian Banks are:
– Royal Bank of Canada (RBC)
– Toronto-Dominion Bank (TD)
– Bank of Nova Scotia (Scotiabank)
– Bank of Montreal (BMO)
– Canadian Imperial Bank of Commerce (CIBC)
Credit Union
Credit unions can be less rigid in their financing requirements and are often a more flexible way to secure financing. It is often best to contact more than one financial institution or a broker to see what package (interest rate, terms, and payments) work best for your lifestyle. The Credit Union Atlantic (CUA) offers the chattel loan insurance program (CLIP) which is available for “loans secured by eligible mobile or modular homes located on sites with short term leases or owned land.”
MEETING WITH A BROKER
According to the Canada Mortgage and Housing Corporation (CMHC), you need to meet with your broker or lender to start the mortgage pre-approval process.
They suggest bringing the following information to the meeting:
– Proof of address
– Source of income
– Proof of down payment
– Proof of savings and investments
– Details of current debts
– Your credit score
WE CAN HELP
The choice of financing your home is an important one, so take the time to research the options available and understand the pros and cons of each. With a little research and some savings you can build the perfect home for you and your family!
We hope this article has helped you understand how to finance a modular home in Canada. Let us help you consider your best option to start the process of borrowing for your new home. With 50 years of experience, we are happy to lead you in the right direction. Contact your home specialist for details.
This article is based on an excerpt from our guide “What to Expect When You’re Expecting a Home.” If you’re new to the modular home buying experience, see the full guide below.