When you first decide to enter the housing market, sometimes you don’t have a lot of money to put down. If you have limited savings, or you’re just beginning your career and your income isn’t quite where you’d like it to be, sometimes purchasing a mobile home can be pretty appealing.
Mobile homes provide many first time homeowners with an opportunity to break into home ownership. Mobile homes are generally cheap and affordable to maintain. For $80,000, you can get yourself a nice home that might be just right for you at this point in your life.
However, there are a number of downsides to mobile home ownership that ought be considered before committing yourself to financing one.
First, and perhaps foremost, is that while you may own your mobile home, chances are that you’ll be paying lot rent on top of your mortgage. Even if you own your home outright, unless you own the land your mobile home is on, you’ll be paying rent each month. In Brandon, rents can be as high as well over $300/mth, which, on top of your mortgage payments, adds up to quite the large monthly obligation.
Another downside to mobile home ownership is depreciation in value of your home. Unlike other homes, which can appreciate in value over the course of their lives, mobile homes depreciate quickly. Like everything you purchase – from your car to your computer – once you purchase your new mobile home, it begins to depreciate.
Unlike a “stick built” home, though, it is unlikely that you own the land beneath your mobile home, which is often what appreciates in value over the course of your ownership. Even if you take great care of your mobile home, you may end up paying more over its life than you will recoup upon resale.
As such, it can be difficult to finance the purchase of a used mobile home. To finance a mobile there is something called The Rule of 40. To calculate your maximum amortization, you start with 40 years, then you subtract the age of the mobile home you are intending to purchase, and the remainder is your maximum allowed amortization.
For example, if you are looking to buy a 20 year old mobile home, your maximum amortization would be 20 years. If the mobile home you want to buy is 30 years old, then you only have 10 years to pay it off. (Check out MLS.ca and try a few examples on your own.)
Suddenly that affordable looking home becomes not so affordable in monthly installments and could put the cost of your home up there with a luxury home. Don’t forget that's BEFORE you add on the lot rent.
Mobile home ownership is a route that many homeowners first take to get into the real estate game. However, as you can see, there are plenty of things to consider before jumping in with both feet. Contact us at CENTUM Mortgage Choice if you have any questions about the ups and downs of mobile homeownership. We’re here to help you make the right choice that’s right for you.
Chris Turcotte is a Mortgage Broker and Owner of CENTUM Mortgage Choice in Brandon, MB. CENTUM Mortgage Choice is Brandon’s Premier Mortgage Brokerage committed to saving you time, money and stress during the mortgage process.