How to Refinance a Mobile Home at a Lower Rate
Refinancing can be a big cost-saver, particularly for mobile homeowners who don’t have mortgages, but instead “chattel loans.”
Chattel loans finance a mobile home as a piece of personal property, rather than as real estate. As a result, the interest rates on these loans are typically much higher than what a mortgage loan would command. This higher rate leaves the homeowner with a hefty monthly payment and lots paid in interest over the life of their loan.
One way mobile homeowners can lower these costs is through refinancing—specifically, refinancing their chattel loan into a mortgage loan once the property is eligible.
Refinancing a Mobile Home
Refinancing into a mortgage loan can take some work, but it can mean significantly lower interest rates—not to mention overall costs—for the remainder of the loan’s life. In general, chattel loans have rates anywhere from 7% to upwards of 12%. At the start of 2019, rates on 30-year fixed mortgage loans were under 4.5%.
Still, as enticing as a mortgage loan may sound, not every mobile home qualifies for one. To be eligible for a mortgage loan, the mobile home must:
- Be situated on a permanent, fixed foundation
- Not have wheels, axles or a towing hitch
- Have been built after June 15, 1976
- Have a foundation that meets the Department of Housing and Urban Development standards
- Have a real estate title, not a personal property title
- Be placed on land that the homeowner owns
There are some exceptions to these rules, which we’ll get into shortly. In most cases, the biggest challenge with refinancing a mobile home is converting the home’s personal property title into a real estate title.
Converting to a Real Estate Title
In some states, there are clear-cut processes for how a personal property title can be converted into a real estate title, with very specific rules for what constitutes real estate and what doesn’t. In other states, it may be more complicated.
Generally, you’ll want to enlist a real estate attorney for help. You can also consult a local title company for exact steps. At the very least, you will need to show the title company the following documents:
- A copy of your home’s certificate of origin
- A certificate of title to the home
- The land deed for the property the home is placed on
After the title company has converted the title, you can then start shopping around for mortgages. You’ll want to focus on lenders who specifically offer loans on mobile and manufactured homes. Not all mortgage companies offer these.
Exceptions to the Rule
Though it is much easier to get a real estate title—not to mention a mortgage loan—if you own the land your mobile home is placed on, there are exceptions to this rule. If you lease your lot in a mobile home community or from some form of a landlord, then you might still qualify under the Federal Housing Administrations Title 1 program. To be eligible for a Title 1 mortgage, you must:
- Inhabit the mobile home as your primary residence
- Be leasing a lot in an FHA-compliant site or community
- Have an FHA-compliant lease in place
- Have a permanent foundation on your home
The Federal Housing Administration has very strict standards for mobile home communities, so make sure you choose yours (and your landlord) carefully if you’re considering a Title 1 mortgage loan.
Costs of Title Conversion and Refinancing
There are several costs associated with refinancing your mobile home with a mortgage loan. For one, there are taxes to consider. Personal property taxes and real estate taxes vary, so depending on your state, you may owe more (or less) once you convert your title.
You will also have costs to originate your mortgage loan, and there will be a down payment, closing costs, and other fees, too. These will depend largely on your lender and the unique fees they charge per loan.
Because converting to a real estate title requires a permanent foundation, you also may have this cost to factor in as well. An affixed foundation can cost $10,000 or more, depending on the footprint of your home.