One of the seemingly unintended groups to fall victim to the government’s latest mortgage changes is owners of mobile homes, according to some concerned mortgage brokers who are seeing the effects on their clients.
The issue stems from the new rule that prohibits insured properties from being refinanced, and that most lenders require mobile homes located in a mobile park to be insured, regardless of the amount of equity the owner has.
“The majority of the 183,000 households living in mobile manufactured homes, through government policy change, have the potential of being locked out of accessing the equity in their homes through traditional bank and credit union channels,” said Dustan Woodhouse, a DLC Mortgage Experts broker based outside of Coquitlam, B.C.
Woodhouse says people are just starting to realize the scale of this issue as mobile home owners seeking refinances are being told it’s not possible, at least not through the major lenders and at the most competitive rates.
An RBC spokesperson confirmed to CMT that it requires all mobile homes to have default insurance issued by CMHC, thereby prohibiting any of those properties from being able to be refinanced.
Several brokers are already reporting cases where their clients have tried to refinance only to find it wasn’t possible, or they are having to use private lenders that don’t fall under the same government regulations as the mainstream lenders.
Joe Tomkins, a mortgage broker with DLC Canadian Mortgage Experts in Nanaimo, B.C., said several of his clients have already been forced to use a private lender in order to refinance, but at a much greater cost.
“A client of mine had to refinance for personal reasons and they needed to get equity out of their home,” he said. “It had to go to a MIC (mortgage investment corporation), and it was 12% and included a very high fee as well. But that was the only option.”
Joel Olson, a DLC Mortgage Experts mortgage broker in Kamloops, B.C., has also had clients refinance at 12% and pay a $4,000 fee because “that was the best and cheapest option of everybody out there.”
He added that the restrictions aren’t unique to mobile homes, but can also include small condos under 550 square feet, homes on leased land, homes built using alternative building methods, etc.
“To be very fair to a private lender…they realize that the ability for them to resell that home in the case of default is now very small and so their risk increases quite a lot as well,” he noted. “They do have a higher default on mobile homes…but that’s still a very small number.”
Tomkins noted that while there’s nothing preventing mobile home purchases, he said the key is that buyers, their real estate agents and mortgage brokers should be aware of the restrictions they will face if they plan on refinancing down the road to access the equity in their home.
“Sure you can buy a new mobile home in a park today with 5% down, and it can be insured by CMHC,” he said. “You just have to make the decision knowing that if you ever want to refinance, here are your refinance options: 12% interest, x-amount of dollars for a fee.”
Department of Finance spokesperson David Barnabe noted that the changes announced last October that restrict insured mortgages from being refinanced apply to all property types and that “there is nothing in the rules that is unique to mobile homes.”
“While the rules for government-backed insured mortgages prescribe certain limits for insured mortgages, lenders are free to set additional parameters for lending decisions…based on their risk appetite.”