There are mobile homes for sale, for much less than stick-built houses, in most areas of the country. Despite the persistent predjudice against them, and sometimes against their residents, mobile homes are the cheap housing choice of millions. The advantages are not always obvious, but they are real.
First of all, let's acknowledge the big "truth" about mobile homes and appreciation or depreciation. It is true in most areas that mobile homes in parks go down in value over time. That's why I don't recommend buying in a park, unless you absolutely can't buy real estate, and you have done the math to see if you are better off than renting a nice apartment. To "do the math" consider lot rent, payment, and the remaining value of the mobile when you put it up for sale, minus what you will still owe, when you are likely to move. These are guesses, but still better than nothing if you are as objective as you can be.
Mobile Homes For Sale With Real Estate
When looking at mobile homes for sale on land, however, you are looking at an entirely different investment. My mobile home in Michigan doubled in value in the twelve years I lived in it. That's because even as the home deteriorated a little over time (don't all houses?), the value of the land continued to rise. You also can do what you like with the home when you own the land. For example, I took in more money from my home than it originally cost, by renting out a room or two over the years.
As mentioned, mobile homes usually sell for much less than other houses, and this means not lower payments. Also, because of the shortened amortization and lower loan amount, you will often build equity faster in a mobile home than in a more expensive house. A quick example follows, for the skeptical among you.
Equity Building With Mobile Homes
If you buy a house with a $100,000 mortgage loan amortised over 30 years at 6% interest, you'll have a payment of $599.60. Of the first payment, $500 will go towards interest, $99.60 towards principal. In other words, you only built equity of $99.60 (I'm ignoring appreciation, but only for the moment).
Second scenario: Find a nice mobile home for sale, and borrow only $30,000, at 8% interest, amortised over 10 years. Note the higher interest - this is always the case with "factory built home mortgages." The shorter term is normal too, but least you'll own your home free-and-clear in 10 years instead of 30. Despite the higher interest and shorter term, the payment will be only $363.99, the first month only $200 will go towards interest. That means the other $163.99 goes towards principal. You bought more house (built more equity) in this scenario.
It's true that a mobile home on land might appreciate more slowly than a "regular" house, but the faster loan pay-down probably more than covers this factor. If you also chose to bank the difference in payments ($235.61 per month), you'd definitely be better off financially with the mobile home versus the more expensive home.
Pay less per month and build more equity! Don't expect your real estate agent to tell you this. Don't expect him to even agree with me after you explain it. I sold real estate years ago, and math skills were not part of the licensing requirements.
Mobile Homes For Sale; Other Advantages
Mobile homes are cheaper to maintain. Years ago I had a mobile home as a rental, and the furnace in it died. This is the most expensive repair you'll have in a mobile. I had to replace it for $1,200, but that was still less than a furnace for a larger home. Consider that for $200 you can tar the roof of your home, or $30 if you do it yourself, instead of $5,000 to re-shingle a traditional roof. The windows, plumbing, doors - all cheaper.
Property taxes will cost less, because they're based on the value of the property, and mobile homes for sale on land have lower value than stick-built houses. Insurance may cost less too, again because you are insuring less value. The only precaution to remember here is to be sure you can get insurance. Very old mobiles may be uninsurable in some areas.
Should You Buy A Mobile Home?
Don't buy a mobile home if prices for houses in the area are just as low. Believe it or not, this is the case in some areas. We bought a house near Butte, Montana for $17,500 - less than mobile homes for sale there. You can see a photo on our site http://www.HousesUnderFiftyThousand.com. Houses do generally hold up better. Then there are the issues of whether your own needs and predjudices will let you be comfortable in a mobile home. They are sometimes for sale in areas you don't want to live in (Certainly true of houses as well). These are personal things you have to consider.
The advantages are clear for many young people starting out. It may be their only option. It may be your better option. Besides a lower initial price, you get simpler, cheaper maintainance, lower monthly payments, less property tax, less for insurance, and faster equity build-up. So don't automatically pass on those mobile homes for sale when you're out home-hunting.
About the author:
About the Author Steve Gillman and his wife Ana have converted their mobile home in Michigan to a rental and moved to Tucson, Arizona. He and his wife also lived for a while in Montana, where they bought a beautiful house (not a mobile) for $17,500. That experience lead to the creation of their website, http://www.HousesUnderFiftyThousand.com
Three Rules of Thumb for
Mortgage Refinancing
by: Stephen L. Nelson, CPA
You might think that deciding to refinance a mortgage requires only a
quick comparison of loan interest rates. Unfortunately, that’s not really
true. Refinancing is trickier than that! Fortunately, three useful rules
of thumb can often help you make sense of refinancing opportunities.
Rule 1: Don’t Ignore Total Interest Costs
You really want to use refinancing as a way to reduce the total
interest cost you pay. While that sounds simple in principle, it is
sometimes difficult to do. The interest costs you pay are a function of
the interest rate, the loan balance, and the loan term period.
When people refinance, they tend to focus solely on the loan interest
rate. But they often don’t pay as much attention to the loan term or the
loan balance.
When you use refinancing—even refinancing at a lower interest rate—to
increase your borrowing or to extend the time over which you borrow, you
often aren’t saving money.
Rule 2: Trade Expensive Money for Cheap Money
For refinancing to make economic sense, however, you do need to swap
higher interest rate debt for lower interest rate debt. This calculation,
however, is tricky. To make an apples-to-apples comparison, you must look
at the annual percentage rate that will be charged on your new loan—this
is the best measure of the new loan’s interest rate cost—and then compare
this to the loan interest rate on your old loan.
You don’t want to compare interest rates on the two loans nor do you
want to compare annual percentage rates on the two loans. Again, just to
make this perfectly clear: You want to compare the loan interest rate on
the old loan to the annual percentage rate on the new loan.
When the annual percentage rate on the new loan is lower than the loan
interest rate on the old loan, then you are truly paying a lower interest
rate.
Comparing annual percentage rates with loan interest rates seems
confusing at first. But note that you would pay only interest on your old
or current loan, so that’s all you need to look at in terms of its costs.
With a new loan, however, you would pay both interest and any origination
or closing cost fees. The annual percentage rate wraps the interest rate
charges and setup charges, origination charges, and closing cost fees into
one interest rate-like number.
Rule 3: Don’t Lengthen the Repayment Period
Be careful that you don’t extend the length of time you borrow by
continually refinancing. For example, one common rule of thumb states that
every time interest rates drop by two percentage points, you should
refinance your mortgage. However, there have been times in recent history
when following this rule would have had you refinancing your mortgage
every few years. This could mean that you would never get your mortgage
paid off. If you refinanced every few years, you would suddenly find
yourself still 30 years away from having your mortgage paid.
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