You’ve been living in your new manufactured home now for just a few years and enjoying the lifestyle. You thought about manufactured housing for quite some time then you finally made the decision to buy. Your monthly payments are comfortable and your financing terms were very competitive.
However, regardless how competitive your current mortgage program is, it’s always a good idea to find out if there is anything better in the current market. Should you refinance the mortgage on your manufactured home?
There are three primary reasons why refinancing your current mortgage might be a good idea. Perhaps the most obvious reason is to obtain a lower rate. If you financed your manufactured home and interest rates have fallen since you obtained your first mortgage, then it might make sense to refinance your existing loan. But don’t just compare interest rates. Instead, take the difference in monthly payments and divide that amount into the closing costs associated with the new loan. If closing costs are $3,000 and you’re saving $75 per month by reducing your mortgage rate, you’ll recover those closing costs in 40 months and continue saving from that point forward. As long as you keep the manufactured home longer than 40 months, in this example refinancing is a good idea.
It can also be a good idea to refinance out of an adjustable rate mortgage or hybrid and into the stability of a fixed rate. Hybrid loans start out a bit lower than their fixed rate counterpart but after the initial fixed rate period on a hybrid, the loan turns into an adjustable rate mortgage. When rates are low, like they are now and you have an adjustable rate mortgage, switching to a fixed rate makes good financial sense.
Finally, you may want to change loan terms when refinancing your manufactured home. Lenders offer fixed rates in various terms in five year increments. When you first financed your manufactured home, you most likely selected the 30 year term. The 30 year fixed rate mortgage is by far the most popular choice compared to other options and one of the reasons is the monthly payment is lower compared to shorter term loans. However, longer term loans also mean more interest paid to the lender over the life of the loan and your mortgage takes longer to pay down. By selecting a shorter term, say a 15, 20 or 25 years, you can reduce the amount of interest paid to the lender and if rates have fallen as well, you can save money each month as well!
These are the three most popular reasons to refinance your manufactured home. You can lower your monthly payments, switch to a more stable loan program, change loan terms or any combination of each of these three options. If you’ve been thinking of refinancing your manufactured home, it’s time to talk to a loan officer to review all the options available.