Park Home Finance; We look at your options

Are you looking for park home finance? You may find that it can be a difficult thing to do. You may not understand your options and what finance is available. In this guide, we will explain your options and your choices in securing park home finance.

LOOKING FOR A RESIDENTIAL PARK HOME?

Can you Get a Park Home Mortgage?

Traditional mortgages for brick-built construction properties are standard in the UK. In fact, according to Finder.com, there were 10.94 million outstanding mortgages in May 2019. From a legal point of view, park homes are a different type of purchase; they have an unusual tenure.

So when it comes to mobile home finance, a misconception is that a park home mortgage can be easily secured. Unfortunately, high street banks and building societies won’t lend on (non-brick) construction park homes. Currently, there are no high street banks that offer park home mortgages. Moving forward, we think this may change as the popularity of park home living increases.

Why Can’t you get a Mortgage on a Park Home?

The first thing to say is that park homes are not physically attached to the ground and if required, could be removed. This scenario makes it difficult for high street banks and building societies to lend money against the purchase of them.

Secondly, the traditional purchase of properties are registered with the UK Land Registry. Mortgages are only issued to buyers when the property is registered to land that goes with a home. This registration applies to both freehold and leasehold properties. As the land under the park home for sale is not registered with the UK Land Registry, park home mortgages can’t be offered to buyers.

What are the Options for Financing a Park Home?

There are four basic options for mobile home finance. Here we look at these options in more detail;

1. Part Exchange your Home

The process of part-exchange allows you to buy a mobile home by releasing funds from selling your current home to the part-exchange company. Once you have found a park home that you wish to buy you can then approach a company to help you part-exchange. Sell My Group recommended Quickmove Properties for part-exchange.

Below is a step-by-step by step illustration of the part exchange process by Quickmove Properties;

There are many benefits to part-exchange which are listed below;

• Speed: With part-exchange, there isn’t an ongoing chain of properties in the process. The purchasers are paying cash so the process will be quicker than traditional property transaction.
• Security: Traditionally, a third of all property sales will breakdown. Once a purchase is agreed (subject to survey) with a part exchange, this should not happen.
• Convenience: Selling and buying is one of the significant stressors in life. Part exchange should take the uncertainty from the process.

Below is a video from Quickmove to explaining how they operate their part-exchange scheme. Note, this may not be the same for every part-exchange company.

For any further questions on the park exchange process or to apply for part-exchange, click the link below;

2. Buying Outright

Buying a park home outright with your own capital instead of raising mobile home finance through a third party may be seen as a traditional way to purchase a park home.

Park homes are generally cheaper than bricks and mortar built homes. Downsizing into a park home is often a good way to release equity and fund the purchase of your new home. Any additional equity from the home can then be put into investments, saving or used to live on.

Unlike part exchange, this process will take longer and there are other costs to factor in like estate agent fees. These are typically between 1-1.5% plus Vat.

3. A Park Home Bridging Loan

A bridging loan is used when money is borrowed over a shorter period of time. This form of borrowing is ideal for those wanting to use the equity in their current property to buy their mobile home. There are two types of bridging loans;

Closed Bridging Loans

Closed bridging loans have a fixed payment date and are over a shorter time than an open bridging loan. This type of bridging loan is usually issued for the time between the exchange of your current property and the completion.

Open Bridging Loans

With an open bridging loan, there isn’t a fixed repayment date, but usually full payment of the loan would be within a year.

4. Specialist Park Home Loans

There are a number of mobile home financing companies regulated under the Financial Conduct Authority that will offer loans on a park home. The park home will be used as security against the loan.

Mobile home lenders will take a variety of factors into account when assessing lending money towards your park home. Here are just a few things a mobile home financing company might look at before offering you any form of a credit on a park home:

• How much does the park home cost? Mobile home finance companies will need to know the sale price, in total, of your prospective park home.
• What is the address of the park home? The site and location can have significant effects on your final offer.
• What is the length of the site lease available?
• What are the full dimensions of the property? Financiers will need to know this so that they can properly value it.
• Are there any security measures in place? As a ‘non-standard’ home, financiers want reassurance when it comes to safety. Park homes may be safe and secure, but on paper, a financier wants evidence that there is security in place.

The rates on these sorts of park home loans will not be as competitive as a mortgage, but if you have no other means of financing your park home, then this is likely to the best option for you. Some lenders will even provide up to 80% of the total purchase price, with loan periods up to 15 years.

Read our guide to PARK HOME SURVEYS.

How Will a Mobile Home Finance Company Make A Decision?

Whenever you apply for credit, it is not just your asset that a finance company will look at. They will therefore need to carefully consider your needs and history, too. If you have bought assets on finance before, you may already know the checks and measures. However, it is worth remembering how park home finance works, and how it differs from other credit.

• Mobile home financing companies will want to know how you are going to use your park home. Are you going to live there permanently? Will you let it to other people, or will you visit purely for the holidays? Who is going to reside there? Mobile home financing companies want to know how long a property will be empty for, too. Therefore, make sure you know all of the honest answers before you apply!
• Finance companies that finance mobile homes will need to know how much finance you require to pay for your park home. This is probably the first factor they look at.
• However, be aware that mobile home loan lenders will look carefully at your financial circumstances. Therefore, if you arrange credit via phone, for example, make sure to have statements with you. Again, you must be honest here – because companies will have the power to check!
• You should also prepare for a credit check. Not all finance companies ask for this, but many do. A credit check or report will advise them on how well you pay your bills. For example, a credit report will tell them if you borrowed money before, and if so, if you paid it back on time.

Why do Park Home Finance Companies Check?

The reason why mobile home finance companies look at all these factors is simple. They want to know how trustworthy you will be at paying them back.. Unfortunately, no financiers can take you at your word. With thorough checks, they will look at your situation and let you know how much money, if at all, you can borrow towards the cost of your park home.

If you do not pass a financier’s credit check, you may need to improve your credit score. Don’t worry! There are plenty of guides online which will tell you how to improve your credit rating in the short term.

Read our guide on why you SHOULD BE BUYING A MOBILE HOME.

Combining Finance and Insurance

A specialist finance company, such as one which deals with park homes, will look at the above factors to help build the perfect package for you. Providing you tick all of their boxes; you should have no problem securing a deal. However, what finance companies may also do is offer you insurance, too. However, don’t be too hasty to accept their offers.

Park home insurance will normally cover you for a lot of expense. It can cover your home, your contents, and even what you intend to use it for! However, you may not always get the best deal if you combine it with park home finance. Therefore, it is wise to shop around for the lowest premiums.

In some cases, you might actually find that combining park home finance and insurance actually lowers your premiums. There really is no guarantee! With this in mind, therefore, be ready to look at various packages and offers. You should never have to settle.

Read our article on PARK HOME INSURANCE.

How to Get the Best Park Home Finance Deal

To conclude, therefore, how do you get the best finance deal on a park home? To maximise your chances of finding a great value package, you should shop around. It’s as simple as that! Fortunately, thanks to the expansion of the internet, it’s never been easier to compare park home finance between various companies.

However, it can take some digging around to get quotes online. Not all finance companies will let you grab quotes via their websites, so make sure to take down numbers and other forms of contact. This might also work in your favour, as it means you can talk with an advisor over the phone about your options, rather than having to muddle your way through all of the jargon online.

Financing a park home might not be the same as applying for a mortgage, however, it can still mean that you have to do a lot of digging around. Buying any kind of home is a big commitment! It’s one you will be paying for in years to come. Therefore, take your park home finance search seriously – and don’t submit yourself to a finance company unless you are sure they offer the best package for your needs. Make sure to check out further guides from Sell My Group to learn more about buying park homes outright.