If the only thing standing between you and your dream to buy a caravan and set it up as a home in a beautiful destination is a lack of finances, you may be wondering if there are any options in this regard.
In this section, we have offered a useful discussion on whether it is possible to get a mortgage on a static caravan and what considerations you need to take into account when buying a caravan.
Can I get a mortgage on a static caravan?
For many people owning a caravan is a dream and living in it is an adventure. However, these tiny homes require a hefty investment, and not everyone has readily available finances to go through with their plans to acquire one.
In such an instance, you may wonder if mortgaging a static caravan is an option. Unfortunately, you cannot get a mortgage on a static caravan. This may come as a surprise to many who consider buying a static caravan equivalent to any residential property. However, there are significant differences.
The main point of difference is the land. Usually, when you take out a conventional mortgage, the loan is secured against the building value and, most importantly, the land where the house or building is located. However, when you buy a static caravan, you only acquire ownership of its physical structure.
The land or plot where your static caravan is placed is leased from the park or land owner for a pre-determined period. Since the land does not belong to you, you cannot put it up as security, and hence taking out a mortgage is not possible.
However, if you are buying the land along with the caravan, you may be able to get a mortgage. Also, if the static caravan’s construction comprises the use of bricks, which is highly unlikely, you may be able to work out a solution. You will need to check the database for the land registry to find out if the property is listed. It is also important to note that when you buy a static caravan, you buy the leasehold, not the freehold.
How can I acquire finance to purchase a static caravan?
Just because a traditional mortgage on a static caravan is not possible, it does not mean that there are no other options. We have offered three options to finance your caravan.
- Get a Hire Purchase Agreement
- Take a secured loan
- Take a personal loan
The most common method for financing a static caravan is a Hire Purchase Agreement, which differs from financing a car or getting a mortgage. When you enter a Hire Purchase Agreement, it implies that you do not own the caravan until it is completely paid off. Until that time, it is just like you are renting or hiring a caravan to stay in.
There are also certain terms and conditions you must comply with during the Hire period, i.e., till the time you pay off the amount. It usually means that similar to any other financial contract, you will be required to pay an additional amount at the end to own the caravan, and once you clear that one last payment with the lender and the park owner, you will acquire full ownership of the static caravan.
Moreover, like any other financial contract to take place, your credit score is an important consideration. It is the record of the payments that you may have made against borrowing done in the past. A good credit score fortifies lenders’ confidence in your ability to pay back should they loan you money via a contract.
Hence, if you have a good credit score, you have good prospects of securing a loan to buy a static caravan. It is also important to comply with the payment schedule and not fall back, or your credit file will take a hit and negatively affects your chances of securing a loan for any purpose in the future. So, when you draw a loan contract, ensure that you have the funds available to clear your scheduled instalments.
Can I buy a caravan and pay monthly?
A new static caravan can cost anywhere from £25,000 and £100,000, while a used caravan may cost anywhere between £5,000 and £50,000. Most caravan finance loans are like regular personal loans, i.e., you borrow a lump sum amount and return it in regular instalments, usually monthly.
In the case of monthly instalments, the payment amount depends on the amount borrowed and the period for which you have borrowed it. Usually, the length of the finance agreement period is one to ten years. An interest rate is charged, usually around 7 to 9%, depending on your credit score.
You will be required to put down a deposit of 10 to 20% of the price of the static caravan. However, the deposit amount varies from one company to the other. Besides the deposit amount, here are the other costs of owning a static caravan.
- Instalment payment
- Holiday park charges and pitch fees
- Depreciation costs
- Gas and electricity charges
- Winterization and drain-down charges
Moreover, if you plan to rent out your static caravan, you must consider costs like safety maintenance, facility passes for renting guests, changeover cleaning, and the tax on any rental income you may earn.