One common misconception that I hear frequently is that mobile homes are cheaper and easier to purchase. Although they can be, if purchased on their own land, mobiles in parks tend to cost more over the long term than some buyers anticipate. There are several factors that contribute to this:
• You generally cannot extend the amortization beyond 25 years (sometimes not past 10 or 15 years depending on the age of the home). This makes monthly payments higher, hence the buyers qualifying maximum mortgage amount will be lowered
• Banks will usually charge their “posted rate” as opposed to the discounted rates that you may receive for a small house or duplex
• Although you commonly pay less in property taxes for a mobile in a park, you will have to factor in the pad rent that is in addition to the taxes
Here is a comparison of $120,000 purchase with 5% down. I have factored in $100 a month for heating as per the industry standard. I have also factored in CMHC fees.
Mobile in park (at current 5 year posted rate of 5.69% over 25 years)
Mortgage Payment $727.99
Pad Rent (estimated) $350
Annual Taxes (estimated) $500
Total Monthly Payment (estimated) $1219.66
Income Required to purchase (estimated) $41,816.80
House or duplex without condo or pad fees (at current 5 year discounted rate of 3.99% over 30 years) …
Mortgage Payment $557.42
Annual Taxes (estimated) $1464
Total Monthly Payment (estimated) $779.42
Income Required to purchase (estimated) $26,722.94
Over a 5 year term, you would pay $9,146.81 less in interest if you were to choose the second option.
Just some food for thought…
• You generally cannot extend the amortization beyond 25 years (sometimes not past 10 or 15 years depending on the age of the home). This makes monthly payments higher, hence the buyers qualifying maximum mortgage amount will be lowered
• Banks will usually charge their “posted rate” as opposed to the discounted rates that you may receive for a small house or duplex
• Although you commonly pay less in property taxes for a mobile in a park, you will have to factor in the pad rent that is in addition to the taxes
Here is a comparison of $120,000 purchase with 5% down. I have factored in $100 a month for heating as per the industry standard. I have also factored in CMHC fees.
Mobile in park (at current 5 year posted rate of 5.69% over 25 years)
Mortgage Payment $727.99
Pad Rent (estimated) $350
Annual Taxes (estimated) $500
Total Monthly Payment (estimated) $1219.66
Income Required to purchase (estimated) $41,816.80
House or duplex without condo or pad fees (at current 5 year discounted rate of 3.99% over 30 years) …
Mortgage Payment $557.42
Annual Taxes (estimated) $1464
Total Monthly Payment (estimated) $779.42
Income Required to purchase (estimated) $26,722.94
Over a 5 year term, you would pay $9,146.81 less in interest if you were to choose the second option.
Just some food for thought…
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