Options for financing the purchase of a manufactured home

Prefabricated houses are gaining a niche in the Spanish real estate market. Less interest, faster construction and a wide variety of designs are some of the reasons why these types of homes have increased their sales in recent years. The figures provided by the National Institute of Statistics (INE) support this trend: in March 2021 there were 47,332 purchases, while in the same month of the previous year this amount was 35,745.

This type of house is produced and completely assembled in the factory of origin and is transported already assembled to the place where it will be located. This is what allows their prices to be lower, becoming a 30% lower than the average of the real estate market. Although the variety of houses within the sector makes the money paid for them also vary.

But the question now is: can I finance a manufactured home? We typically have two options for financing a manufactured home: the personal loan or home loan. The choice of one or the other will depend on whether it is a movable or immovable property.

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When buying a manufactured home above 50,000 euros, it is usually better to opt for a mortgage. Photo: Getty Creative.

Movable or immovable property?

The main difference between the two concepts is that the mobile home is not anchored to the ground and, therefore, has its own means to supply itself with electricity and water.

On the contrary, the real estate is anchored and is larger and more resistant, but at the same time it needs electricity connections and a public water supply.

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This means that prices vary from one to another and that the type of aid to request is also different. Mobile homes are usually purchased with personal loans but the latter, having a higher price, require in most cases of self-promoting mortgages.

Mortgages

As long as the house is considered a real estate, you can apply for a mortgage. The manufacturer or builder usually has financing agreements with banks, but the house must be correctly registered in the Property Registry.

Unlike other common mortgage loans, in this particular one, the client does not receive all the money in a single installment, but the bank provides the money through bonds. The first of the installments is the one with the highest amount to be able to cover the initial expenses of the house. Subsequently, the money is received in installments stipulated by the parties.

The most common is that they grant a maximum of 80 – 85% of the money that is going to be needed. The client should know that normally these types of mortgages do not cover the land, so they must have this plot before requesting the aid. On the other hand, before granting the amount, the bank will request a building license granted by the corresponding City Council and also the approval of the College of Architects.

Therefore, when you buy a manufactured home for above 50,000 euros, it is usually better to opt for a mortgage.

Personal loan

In the event that you opt for a movable property, there is no mortgage option, but there are other grants to finance the construction. The best option in these cases is to take out a personal loan. The advantages of this alternative is that free of most of the formalization costs to which mortgages are subject and are also subject to some minor commissions and links. Therefore, in this case you will not have to get too many licenses, only those that correspond to the location of the house.

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But there is also a negative part of these loans, which is that they are usually made to a reduced term, normally less than 10 years, when normally in a mortgage of this type the average time is around 30 years. Another disadvantage is the type of interest, which is usually higher, between 5 and 8%, compared to 2% for mortgages.

Sit down to count to decide

The material of the house will also influence this choice, because for example, wood is a cheaper material but maintenance is usually more expensive and it is preferable to build with concrete or steel. But all this must be assessed before choosing the type of help that you want to request. If finally the final price is not very high, you may be interested in opting for a personal loan because even though the monthly installments are higher, the savings can be considerable.

Otherwise, if we need 50,000 euros to buy the house and it is decided to request a mortgage for that amount, the formalization costs would be around 2,000 euros. If you opt for a personal loan in this case you could save all that money, but we would have to pay much more each month.

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