Financing A Mobile Home On A Rented Pad

Financing a mobile home on a rented pad?  Can this be done? Yes, we just have to take a couple of things into consideration first…

Legally, the first thing to take into account is the existence of a serial number.  As long as the mobile home has a serial number, it’s generally possible for a mortgage lender to take them as security.

Now from a practical perspective, not all homes or parks will be approved.

Why is that?  Well, there are 3 more important things to consider:

• In the lender’s eyes, it’s the newer the better when it comes to mobile homes.  They are depreciating assets, so an older model will be worth significantly less than a newer mobile home.   Unlike a 40 year old stick built home that still has some remaining economic life, a 40 year old mobile home is usually at the end of its life.
• Lenders will also want a park owner’s consent to the mortgage.  In effect, this means the lender wants to know if pad rent payments aren’t made and the lender will want the right to cure any defaults.  If the park owner won’t consent or provide the form of consent required by the lender, a mortgage may not be possible.
• LTV and Amortization will be lower than it would be with a traditional home.  This is due to the fact that the mobile home is depreciating and therefore the amortization will be lower.   And since the borrower doesn’t own the land, the Loan to Value will likely be much more conservative.

While not as common as freehold mortgages, there are still lenders out there that can help.  Make sure to ask around if you have a borrower looking to finance a mobile home on a rented pad.  As long as you’ve taken all appropriate considerations into account, a solution can be well within reach.