A park home could be an attractive option if you are looking for a change of pace from traditional brick-and-mortar houses home and an emphasis on outdoor living. In fact, park homes have been gaining popularity due to it’s attractiveness and affordability.
However, as a buyer, one might be wondering whether it’s possible to secure a mortgage for a park home.
Can you get a mortgage on a park home?
No, you cannot get a conventional mortgage from a high street bank on a park home. This is because the Financial Conduct Authority (FCA) has regulations in place that restrict lenders from offering this type of loan.
In this article, we’ll discuss everything you need to know about a mortgage for park home and other financing options.
What Are Park Homes?
Park homes, also known as mobile homes, are detached prefabricated residential structures designed for permanent or semi-permanent occupancy.
They come in all shapes and sizes and can be tailored to suit your lifestyle needs, from holiday homes to residential properties.
These homes are typically built offsite and then installed in a specially designated park home area, making them a perfect choice for individuals seeking to downsize or retire.
Why You Cannot Get a Mortgage On a Park Home?
Unlike traditional houses, where the owner owns both the structure and the land, park home buyers only own their structure.
When buying a park home, you are not buying the land but rather a long-term lease that may last up to a few years.
The land on which the park home sits is owned by the site owner, who also collects rent for its occupation.
This is why conventional mortgage providers are unwilling to offer mortgages for park homes, as they do not fall under traditional definitions of ownership.
Financing Options For Park Homes
Given that a mortgage is not an option for park home buyers, there are still several financing options available.
1. Savings
The very first option is to purchase the home outright using your savings. For individuals looking to downsize, this would be a great option as it can remove any monthly payments associated with the park home.
If purchasing the property outright isn’t an option for you, there are a few more financing options available such as part exchange schemes, specialist finance companies, personal loans, and peer-to-peer lending.
All of these financing options come with their own set of advantages and disadvantages. So do your research before committing to any one of them.
2. Part Exchange Scheme
When using a part exchange scheme, you would purchase the park home from the site owner and agree to ‘trade in’ your current property. The park homeowner will then take possession of your existing property as payment for the new one.
This is a great way to secure the park home without having to go through all of the usual mortgage procedures.
But what if the price of your current home is more than that of the park home? Well, the site owner will pay you the difference in cash.
That being said, part exchange schemes don’t always work out as cheaply as you may expect, and there could be hidden costs associated with it.
3. Specialist Finance Companies
You can also take out a loan from a specialist finance company to purchase the park home. These companies are regulated under the Financial Service Authority (FSA) and usually provide loans for specific purposes, such as mobile and manufactured homes, holiday homes, and park homes.
However, you should still be aware of the interest rates and repayment options offered by the finance company before you take out a loan.
4. Personal Loans
If you have sufficient funds in your savings account or other options are not available, then you can also take out a personal loan to finance the purchase of a park home. This type of loan typically require collateral in the form of assets, which may not be an option for some buyers and if you fail to make the repayments on time, the lender has the right to repossess it.
Personal loans are usually more expensive than other financing options since they have higher interest rates and can be a long-term commitment.
How Do Park Home Loans Work?
As mentioned above, there are several specialist finance companies that understand the needs of buyers looking to purchase a park home. These companies usually offer loans just like a typical home loan, with the same interest rates and repayment options.
The amount of loan you can get depends on your credit score, income history, and other factors related to personal finance. Whereas the interest rates will vary depending on your loan amount, the loan term, and other factors such as whether you are taking out a fixed or variable rate mortgage.
The repayment terms typically range from five to twenty years, giving you the ease of managing your budget while repaying the loan.
When taking out a loan to purchase a park home, you should make sure that you are comfortable with the interest rate and repayment terms offered by the lender and have a clear understanding of the all the costs involved.
It is highly recommended that you compare different lenders and their offers before signing any paperwork so you can get the best deal.
Factors Affecting Mortgage Approval
When it comes to taking out any loan, there are certain factors that will affect your mortgage approval. These include:
- Credit score and credit history: You need to have a good credit score to get your loan approved. A good credit history demonstrates your ability to meet your financial obligations on time.
- Annual income: The size of the loan you can get depends on the amount of money that you bring in each year. You should have a steady source of income and there should be a proof of it.
- Down payment: Most lenders require a down payment before they approve a loan, usually between 5 and 20 percent of the total cost.
- Debt-to-income ratio: Your debt-to-income ratio is a measure of how much debt you have in comparison to your income. It is important to keep this figure low in order to be eligible for a loan.
- Existing assets: To get your loan approved, you should have some assets, such as savings and investments to show the lender.
Conclusion
Park homes offer a cost-effective housing solution in the UK. And the good news is that you can secure a mortgage for a park home thanks to the evolving mortgage market and specialized lenders.
However, as a buyer, you must conduct thorough research, seek professional advice, and weigh the benefits against the potential risks.
By making an informed decision, you can enjoy the serenity and comfort of living in a park home.