Refinancing a home allows borrowers to replace their current mortgage with a new one, typically with more favorable rates and/or term lengths.
A manufactured home refinance essentially works the same, but the process involves a few more factors and considerations.
What's in this article?
In this step-by-step review, we’ll explain the process for refinancing a manufactured home, including eligibility, types of loans and costs.
Are you eligible to refinance your manufactured home?
First, let’s talk about the difference between mobile and manufactured homes.
These terms are often used interchangeably, but they have a few key differences that affect a homeowner’s eligibility:
- Mobile home: Refers to factory-built homes constructed before June 15, 1976; built with fewer regulations in place
- Manufactured home: Refers to factory-built homes constructed after June 15, 1976; must meet certain standards established by the U.S. Department of Housing and Urban Development (HUD)
Mobile homes are often classified as personal property, while manufactured homes are considered real property (or real estate) as long as they are placed on a permanent foundation and situated on land which is owned.
This article focuses on manufactured homes that meet the safety and construction standards established by the HUD.
Differences between real property and personal property
When you apply for refinancing for a manufactured home, your lender will need to confirm that it is considered real property by checking the following:
- The home is permanently affixed to a foundation.
- You own both the manufactured home and the land.
- You have converted the home’s title from personal property to real property.
- The home is compliant with the HUD’s construction and safety standards.
A home classified as personal property is on leased land or is not on a permanent foundation.
On the other hand, a manufactured home meeting the criteria of real property is treated in the same way as site-built homes in terms of your refinancing options.
Ready To Take Your Next Step?
Types of refinance loans for manufactured homes
Refinancing your manufactured home can unlock the following options for you:
- Lower your interest rate
- Shorten the length of your term
- Reduce your monthly payments
- Tap into your home equity
Depending on your current loan type, financial health and whether your home is classified as real property, you will have different refinance options.
Let’s look at the most common types of refinance loans for manufactured homes.
Rate-and-term refinance
A rate-and-term refinance helps homeowners access lower interest rates or more favorable loan terms, such as shorter or longer term lengths.
If interest rates have dropped since you took out your original mortgage or your credit score has improved, you can use a rate-and-term refinance to secure a lower interest rate and monthly payments.
Some homeowners choose to shorten their terms, increasing monthly payments but reducing the amount of interest paid over the life of the loan.
Cash-out refinance
As you make your monthly mortgage payments, you build home equity.
With a cash-out refinance, you can tap into this home equity by taking out a new loan larger than your current loan balance.
The difference between the two loans is then distributed to you in cash, which you can use for home improvements, debt consolidation or any other purpose you choose.
Streamline refinance options
Homeowners with FHA or VA loans on their manufactured homes may be able to access streamline refinance programs, which offer a faster process with fewer documentation requirements.
However, streamline programs do not offer cash-out refinance options.
Steps to refinance your manufactured home
Refinancing ultimately aims to make your loan fit better into your life, whether that means additional savings or extra cash.
Let’s review the steps in refinancing your manufactured home so you can confidently approach the process.
1. Check your current loan terms
First, you’ll want to review your current loan terms to determine whether refinancing makes sense for you at this point.
Take a look at the following:
- What are current interest rates? If market interest rates are lower than your current mortgage rate, it may be a good time to refinance your mortgage to lower your monthly payments.
- How much time is left on your loan? You can shorten your loan term to pay off your home faster and reduce the interest (that is, the total cost) you’ll pay over time. If you want to lower your monthly mortgage payments, you could choose a longer term length.
- Do you have any prepayment penalties? Check to see whether you will have a fee for paying off your loan early. Additional costs could chip into your potential refinance savings.
Generally, it’s best to refinance if the rate is at least 0.5-1% lower than your current rate.
Compass Mortgage can help you quickly determine whether refinancing is worthwhile based on your current loan terms and conditions.
2. Determine your home’s value
Most borrowers must get an appraisal to confirm the manufactured home’s current value.
If your home has appreciated and you have built enough equity into the home (through regular, punctual monthly payments), you may be eligible to refinance.
Lenders typically require that homeowners have at least 20% equity in their homes, especially if they want to take cash out.
3. Choose the right loan type
Do you want to adjust your interest rate and your term length or take cash out?
Your goals will determine the type of refinance, including rate-and-term, cash-out or streamline options.
The loan officers at Compass Mortgage will gladly help guide you through this process.
4. Complete the application process
Once you’ve selected your loan type, the final step is to complete an application.
You’ll need to provide certain documentation, including:
- Proof of income
- Current loan documentation
- Proof of land ownership and home title
- Credit history
- Home appraisal and inspection
After the lender has reviewed all documentation and confirmed your eligibility, you can proceed to closing!
How much does it cost to refinance?
Refinancing includes closing costs and fees, similar to a home purchase.
These fees include:
- Loan origination
- Appraisal
- Title insurance
Costs can generally add up to 2-6% of the loan amount.
Borrowers need to determine their break-even point to understand how long it will take their refinance savings to cover the up-front costs.
Refinance your manufactured home with Compass Mortgage
Is it a good time to refinance your manufactured home? Fortunately, you don’t have to figure this out alone!
The experienced loan officers at Compass Mortgage are ready to help you answer this question.
Apply with Compass Mortgage now to unlock your personalized refinance options.