mobile-home-mortgage

My first home was in a mobile home park, but I couldn't get a mortgage.

Way back, my first home was a mobile home in Calgary's Greenwood Village mobile home park, out in the northwest part of the city. It was actually a nice park, and the mountains were visible, and lots of places to walk our dog. Our first home is the one in the centre of the picture, and the little shed I built is still standing out back. We couldn't get a mortgage back then for reasons I didn't understand, so we bought it with a little help from the Bank of Mom & Dad.

The circumstances leading up to the mobile home purchase were 3 rent increase in under a year from our landlord on a little shack in Calgary's now very trendy West Hillhurst neighborhood. Idrove by that little shack on Westmount Drive a few weeks ago, and it is still there collecting rent. I don't think a thing has changed since we lived there 25 years ago! Back then, that little house was worth about $60K. Today, the lot alone is worth $600K! That's called price appreciation, and it's a powerful force in owning real estate. Meanwhile, the owners of Greenwood Village are also smiling cheek-to-cheek. They have had mobile home owners pay them rent for years and years and years, and the land is now worth a fortune. But none of that price appreciation will ever belong to the park tenants. That's why we moved after only 2 years and bought actual real estate (back then paid $130K, value in 2015 ~$575K).

Often buyers are attracted to manufactured homes in mobile home communities because of the perceived lower price relative to a traditional home on an owned-lot. What the buyer fails to consider is that in addition to the monthly loan payment on the mobile, there is also a monthly lot rent payment to the park management perhaps in the order of $400-$500/month or more. Combine the two payments, and it's actually costing as much if not more per month than a mortgage payment on a small house.

The other day I got a call from a couple looking at buying a newer manufactured home on a rented lot in a park in a smaller Alberta town just as we did all those years ago, and wondering what options they had for a mobile home mortgage. It prompted me to do some math and write this blog. Here's the email reply I wrote:

"Hey folks, I did some math for you yesterday. A $175K mobile home in a park would have a $715/mo payment (4.64% 25 year AM, $35K down payment), plus $350 park fee = $1065/mo for housing. As there is no real estate, you'd be buying a depreciating asset that requires a higher-interest bank/personal (collateral) loan. Of course, the park monthly fee is money down the drain.

Out of curiosity, I calculated backwards to see what home value the same $1065/mo would buy. The answer is a $290K house with $35K down will have the same $1065/mo payment. In this case, you'd own real estate, which is an appreciating asset. About half of each monthly payment would be paying down the loan balance each month (i.e. you'll pay off $30K in 5 years vs $12K paid off on mobile).

One item yet to factor is property tax, which is park-dependent. Some parks charge you a portion of their property tax bill (seriously). On a home in the $250K range, property tax might be $170/mo. All-in-all, a $250K traditional home is likely equivalent to a $175K mobile, with the primary difference being you will have equity via price appreciation when one dayyou sell the home."

So, I'm not knocking living in a mobile home park. It served us well at that point in our life. My point in this article is about making decisions with good financial advice and all the facts. If there is a way to buy real estate, that would be my recommendation. I'd be happy to help you figure out your options too. Please feel free to contact me.

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Topics: Mobile Home, Buying a home, Down Payment