mobile-home-mortgage

My first home was in a mobile home park...

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 qualify for a mortgage back then for reasons I didn't understand, so we bought it for $22K with a little help from the Bank of Mom & Dad. It was a great home.

The circumstances leading up to the mobile home purchase were three rapid rent increase in under a year from our landlord on a little shack in Calgary's now very trendy West Hillhurst neighborhood. I drove 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 and the properties to the left and right $1M a piece! 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 lot rent for years and years and years, and their land is now worth a fortune - that's how it works. We soon realized that if we wanted some price appreciation potential, that we should buy something where we owned the land. So we saved a down payment for a couple of years and bought a little bungalow in Calgary as our next home. As it relates to to this example, we paid $22K for our little mobile in 1988 and today, it would be worth about the same. As to our second home, the bungalow, we paid $130K in 1992 and in 2015 that same home was worth ~$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 loan. 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 loan for a $175K mobile home in a park would have a $715/mo payment (4.64% 25 year AM, $35K down payment), plus $350/mo park fee = $1065/mo for housing. Keep in mind that - when you don't own the land - the interest rate is higher (called a  collateral loan). The monthly park rental fee  goes directly to the park owner.

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 the mobile home loan).

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 where you own the land 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 the potential for more price appreciation that the traditional home has when one day you sell the home."

So, I'm not knocking living in a mobile home park on leased-land. It served us well at that point in our lives, we had our own space, and we were in control of our property. There are certain parts of the country where you could not come close to buying a home on its own land, but can live in a manufactured home community in a great location for a whole lot less. So the point in this article is about exploring all the options and making decisions with good financial advice and all the facts. 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