Manufactured Home Refinance

From LoveToKnow Mortgage

If you are living in a manufactured home, refinance might be a good financial strategy for you to consider. Lower monthly payments could be the result if you do your homework.

Refinancing can result in reduced monthly payments.

Deciding to Refinance

Manufactured housing is housing built in a manufacturing environment, not on the property. It might be called manufactured housing, a mobile home or a modular home. Regardless of what the style of home is called, the decision of whether or not to refinance depends upon the homeowner's unique situation and financial needs.

Some refinancing decisions are made to reduce costs to the homeowner each month and some are made to change the terms of the loan without any change in interest rate. Common reasons for refinancing a manufactured home include:

To lower the interest rate – When new interest rates offered are lower than the rate being charged on the existing loan monthly payments can be reduced by refinancing the old high interest loan with a new lower interest loan. The rule of thumb is that the new interest rate needs to be at least two percent lower than the old interest rate to compensate for the costs that the homeowner will be charged for the new loan.
To shorten the term of the loan – A homeowner may decide to pay off a thirty-year loan with a fifteen or twenty-year loan. This allows the homeowner to become mortgage-free more quickly, a popular pre-retirement strategy.
To obtain cash – A new loan can be obtained for an amount in excess of the amount of money needed to pay off the old loan, leaving the difference available to the homeowner in cash.
To change from a personal loan to a more traditional mortgage - Homeowners may not have had the option of a traditional mortgage when they originally purchased their home.

Selecting a Manufactured Home Refinance Loan

Personal Loans

Loans to purchase a manufactured home are frequently personal loans, not mortgage loans. Personal loans tend to carry higher interest rates than traditional mortgages. Loans for used manufactured homes typically have higher interest rates than loans for new homes.

Personal loans are used to finance manufactured homes if the home is not sitting on property owned by the homeowner or if the home is not permanently attached to a foundation and utilities (such as a septic tank or sewer system).

Mortgage Loans

A homeowner may qualify for a traditional mortgage if he or she is looking for a loan to finance both the purchase of the manufactured home and the land on which the home is sitting. Lenders have very specific restrictions for mortgages designed for manufactured homes. The restrictions include a variety of factors such as requiring the home to be:

Affixed with a permanent foundation to land owned by the homeowner
Permanently connected to utilities such as water, power and sewage
At least twelve foot wide with at least 600 square feet

Modular homes are typically financed by lenders without any special requirements. These homes are assembled in a factory using wood stud walls and drywall and then delivered in sections to the home site for final assembly. From the lender's perspective, the completed modular home is usually considered for a traditional home mortgage and does not have the restrictions required for other forms of manufactured housing such as mobile homes.

Run the Numbers

It is important to shop around for the best interest rates and terms. Not all lenders are the same when it comes to designing the terms of their loans, determining the upfront fees, selecting the terms and setting the rates. One lender may have low interest rates with high upfront fees while another lender may offer shorter term loans but require a higher interest rate.

Homeowners should request detailed information about the loans they are considering. Groups of lenders, such as the Manufactured Housing (MH) Global Network, offer a one-stop service called the MH Loan Finder Service to request information from several lenders. The service is free to homeowners because it is paid for by the participating lenders. Homeowners are asked to complete a short questionnaire. Lenders use the information provided on the questionnaire to provide information to the homeowner on loans that meet the needs expressed on the questionnaire. The information is provided within 24 hours.

By comparing the rates, terms and costs of various loans, homeowners can determine if refinancing makes sense in their particular financial situation, and then they can select a lender to work with.