There are many reasons to refinance your home loan. Some common reasons are lowering your interest rate and monthly payment, renovating your home, consolidating high-interest debts, getting rid of mortgage insurance, or even buying an investment property.
Make sure it is a sound reason to refinance your mobile home with cash out. Let us show you how.
Manufactured Home Loans and Refinancing
Let’s face it, manufactured home loans and refinancing mobile home loans are more challenging to achieve than a traditional home. There are two main reasons why it’s hard to refinance or get a loan than their site-built counterparts. Manufactured homes have smaller loan sizes and more considerable fees, producing fewer cost savings. And most manufactured homeowners with chattel loans rarely do mobile home refinancing because they have fewer options. In addition, whether or not you own the land is also a factor.
This type of lending practice widens homeownership gaps and economic divides. Manufactured homes are priced between 10% and 35% less per square foot than traditional homes. In essence, it boils down to inequitable financing opportunities because the loan amounts are so small most banks don’t want to deal with the nuisance for a pittance, plus manufactured homeowners are more on the low-income side.
Types of Manufactured Home Refinance Options
- Cash-out refinance: In a “cash-out refinance,” you take out a new home loan for more money than what you owe on your current loan and receive the difference in cash.
- Cash-in refinance: This involves putting a chunk of change into the refi process rather than taking it out. You pay down a significant amount of your mortgage balance and increase the equity in your home.
- Rate and term refinance: This allows borrowers to change the interest rates and loan terms of an existing mortgage.
- Reverse mortgage: a refinancing option for borrowers over the age of 62 with sufficient equity in their homes.
- No-closing-cost refinance: The borrower does not have to pay the closing costs upfront. The closing costs are covered with a higher interest rate loan or rolled into the principal.
- Short refinance: Your lender replaces your existing mortgage with a loan with a reduced balance so that monthly payments on the loan are lowered to a more realistically affordable level. They are usually done for people who have defaulted on their mortgage payments.
You must have a double-wide manufactured home to be eligible for a cash-out refinance; single-wides are not eligible. You must have owned the manufactured home and land for at least 12 months before the loan application date.
What is Required for a Manufactured Home Cash-Out Refinance?
With a Limited Cash-Out Refinance Transaction, you can pay off current mortgages, roll in your closing costs and add the construction fees to attach your home to your land. You can pocket extra cash or a percentage of the balance of the new mortgage, whichever is less. Learn more about what is required for a manufactured home refinance.
These may involve the following scenarios:
- To pay off an existing personal property lien on a new manufactured home
- To pay off a first lien mortgage secured by an existing manufactured home and land
The maximum LTV ratio (and CLTV ratio, if applicable) for a limited cash-out refinance transaction for a loan secured by a manufactured home and land will be based on the lower of:
- the current appraised value of the manufactured home and land; or
- if the borrower owned the manufactured home for less than 12 months on the loan application date
- if there were separate liens, secure the house and land. Then there is the lowest price at which the home was sold during those 12 months plus the lower the current appraised value of the land, or the lowest sales price at which the land was sold n the past 12 months.
- Lastly, if a single lien secures the home and land, the lowest price at which the house and land were sold during those 12 months.
Proceeds of a limited cash-out refinance mortgage may be used to:
- pay off the outstanding principal balance of an existing personal property lien or first-lien mortgage secured by the manufactured home and land (or existing liens if separate first liens encumbered the house and land)
- pay off the outstanding principal balance of an existing subordinate mortgage or lien secured by the manufactured home and land, but only if it was used to purchase the manufactured home and land
- finance costs of construction
- finance closing costs (including prepaid expenses); and
- provide cash back to the borrower in an amount not to exceed the lesser of 2% of the balance of the new refinance mortgage or $2,000
Cash-Out Refinance Transactions
A cash-out refinance:
- involves the payoff of an existing first lien mortgage secured by the manufactured home and land (or existing liens if separate first liens encumbered the house and land); or
- Enables the property owner to obtain a mortgage on a property that does not already have a mortgage and permits the borrower to take equity out that borrowers may use for any purpose. To be eligible for a cash-out refinance, the borrower of the property must be a multi-width manufactured home (single-width are not permitted). The borrower must have owned the manufactured home and land for at least 12 months before the loan application date. The LTV, CLTV, and HCLTV ratios will be based on the current appraised value of the manufactured home and land
What are the differences between manufactured, mobile and modular homes? Check out this video to learn more:
Mobile Home Refinance Loan Options
If you choose to refinance your mobile home with cash out, several loans are available.
- Conventional mortgage: A conventional mortgage is a “conforming” loan, which means it meets Fannie Mae’s or Freddie Mac’s requirements. Rates are approximately 5.99 for a 30-year fixed; 5.48 for a 20-year fixed; 5.5 for a 15-year fixed; 5.565% for a 10-year fixed. You will need a minimum of 620 to qualify.
- FHA (Federal Housing Administration) Loan: An FHA loan is a government-backed mortgage loan that allows you to buy a home with a looser financial requirement. They offer both fixed-rate and adjustable-rate and 15 or 30-year terms. Applicants must have a minimum credit score of 580 to qualify for an FHA cash-out refinance.
- VA Loan: This loan is only available to military veterans and active service members with the Department of Veterans Affairs (VA). The VA doesn’t set a required minimum credit score for a VA loan. Most mortgage lenders will want to see a credit score above 620.
- USDA Loan: This allows borrowers of United States Department of Agriculture (USDA) loans to lower their interest rate and change their loan terms. No appraisal is required.
- A chattel loan: These are loans for a manufactured home or other movable pieces of personal property, such as machinery or a vehicle. Chattel lenders will require a credit score of as little as 575 or as high as 660.
- A personal loan: This is money borrowed from a bank, credit union, or online lender that you pay back in fixed monthly payments or installments. Generally, borrowers need a credit score of at least 610 to 640 to qualify for a personal loan. To be eligible for a lender’s lowest interest rate, borrowers typically need a score of at least 690.
The Bottom Line
While finding lenders to refinance mobile homes with cash out can be challenging, it is not impossible.
Ultimately, the type of mortgage refinancing you will come down to your loan type, qualifications and financial goals.
While mobile home lending is a bit more of a niche industry, and most lenders do not specialize or offer this loan product, you can learn more about the 6 Best Lenders for Purchasing a Mobile Home with Bad Credit.
It depends on the loan. All FHA loans, including cash-out refinances, require mortgage insurance. In conventional loan cashouts, you will if your equity dips below 20%. A VA home loan doesn’t require down payments or monthly mortgage insurance. You pay a VA funding fee at closing. This one-time fee helps to lower the cost of the loan.
If your mobile home is permanently affixed to a foundation, it will be easier to refinance and is considered “real property.” The owner of real property has all the rights of ownership, including the right to possess, sell, lease, and enjoy the land, also known as the bundle of rights.
For a cash-out refinance, there is no down payment requirement. But lenders will limit the amount you can cash out to 80 percent of the equity in your home.