Mobile home refinancing is similar to a traditional home refinance and can help you achieve your financial goals. There are many reasons for refinancing your mobile home, including lowering your interest rate to save money or even paying down the loan faster. Refinancing mobile homes can be a confusing and frustrating process for many homeowners. Here are several tips on how to refinance a mobile home and save money in the process.
Mortgage Loans vs. Personal Property Loan
Are you paying on a mortgage for your mobile home or do you have a personal property loan? Also known as chattel loans, personal property loans are often more costly and have shorter term lengths. In order for most lenders to put a mortgage on your mobile home, it will need to permanently attached to your land. Additionally, lenders will require that you have title on the land your mobile home is attached to.
It doesn't matter which type of loan you're currently paying on, with interest rates still near historic lows, refinancing can help improve your financial situation. Lowering the interest rate on your home loan reduces your payments with the added benefit of improving your cash flow.
Paying off your home loan builds equity in your property, affording you the possibility of borrowing against the equity if the need arises. Choosing a shorter term length on your new mortgage or personal property loan allows you to pay down the balance faster and build equity in your home. Loans with shorter term lengths typically come with lower interest rates, saving you money on your home's financing.
Which Mobile Loan is Right for You?
Personal property loans are slightly easier to get than a mortgage loan for many mobile homeowners, as the mortgage underwriting requirements are typically more strict for most lenders. Programs and terms vary widely from one lender to the next, so comparison shopping for the lowest refinance rates and fees on a personal property loan is just as important as shopping for a mortgage loan.
One of the challenges of mobile home refinancing is that mobile homes are depreciating assets, much like an automobile. If you own an older mobile home, it can be difficult to meet lender requirements to qualify for a mortgage loan. Some lenders will simply refuse to write a mortgage on a mobile home after a certain age.
Another roadblock for many mobile homeowners are the minimum amounts required for refinancing. Meeting a lender's minimum loan could depend on whether you're refinancing the home or the home and the land your mobile home is attached to. You could also find the pool of available lenders for a mortgage is small because many only offer personal property loans with higher interest rates and fees.
Is Mobile Home Refinancing Worthwhile?
If you can save money by lowering your interest rate or getting better terms, it doesn't matter which type of loan you get for your mobile home. Keep in mind that mortgage loans and personal property loans both have fees, and before you realize any benefit from refinancing, you'll need to recoup those fees from your lower monthly payment.
You can quickly approximate how long it will take to break even from refinancing your mobile home by adding up all the fees and dividing by the amount your monthly payment is going down, or use our Refinance Breakeven Calculator. This will tell you the number of months it will take to recoup your out-of-pocket expenses. If this break-even point is acceptable to you, then refinancing your mobile home makes sense.