Many families opt for mobile homes as a less expensive means of owning a home. Yet, certain aspects of the home may change the type of loan for which is qualifies; this can make a big difference in how much you wind up paying in the end. Refinancing a mobile home can drastically influence interest rates. Here’s a look at the process of refinancing mobile homes.
Understanding Mobile Home Loans
There are two different ways to finance a mobile home. If your mobile home is larger than 500 square feet, built after 1976 with HUD certification, and affixed to the property it sits on with a permanent foundation, your mobile or manufactured home was probably mortgaged just like a normal home. However, if you pay your personal property taxes for the home to the DMV or it is not attached to a foundation, you probably had to take out a personal property loan, rather than a home loan.
The Big Difference in Personal Loans and Mortgages
Why does this matter? While it is true you can get a loan for your mobile home in either case, interest rates on personal property loans (also called chattel loans) tend to be much higher than the interest rates on mortgages. Additionally, chattel loans are generally for much shorter periods of time. This may or may not be in your best interest.
Personal property loans on mobile homes can be as high as 13%, while mortgage loans on real estate tend to stay under 5%. Furthermore, mortgages tend to be paid out over about 30 years in general, while chattel loans tend to be more 15-20 year loans. Refinancing a mobile home can lower your interest and lower your monthly payments, either through a lower interest rate or by paying over an extra decade or two (although this can mean you pay more in interest over the extra years).
Refinancing Requirements
There are similar requirements to refinance a mobile home loan as a mortgage refinancing. Again, the home must be built on a foundation on permanent property -- and furthermore, you must own the property it sits on. Also important to note is the new program created by FHA (Federal Housing Administration) that allows mobile home owners the ability to qualify their home as real estate despite leasing the property the house is situated on -- as long as it is permanently on the property.
Refinancing Mobile Homes
Ultimately, yes, you can refinance a mobile home. If you started out with a real estate loan, or mortgage, it tends to be much easier to refinance the home. This is largely because if you are trying to refinance a loan that was originally a chattel loan, it is probably going to be a better option to meet the requirements so that your mobile home is real estate, instead of personal property. You get better interest rates, a longer loan (which means lower payments), and, perhaps best of all, real estate taxes tend to be lower than personal property taxes. Talk to your loan holder about your options for refinancing.
