Finding the Right Rate
Question:
We purchased a new manufactured home in 2006 for $85,000 and put $50,000 down. It’s financed for 20 years at 6.5 percent. The loan balance is $30,500 and the home is assessed for $56,000. We have great credit but cannot get a lender to refinance at today’s low mortgage rates. What can we do?
Answer:
In the eyes of the lending community, a manufactured home is personal property, not “real estate” that can be secured with a mortgage. Your current financing is a personal property loan.
Your rate is now 6.5 percent and the remaining loan term is 14 years. A new loan for a manufactured home would be priced at about 6 percent as of this writing.
The better option is to take the money you would have spent on new financing and – if your loan allows prepayments without penalty – pay down your current balance. This will reduce both your loan term and overall financing expense.
Question:
I have an interest-only adjustable rate mortgage. The start rate is 5.625 percent and lasts 10 years. The rate will increase to 10.625 percent in 2015. I have equity, I have been prepaying the loan and planned to sell before 2015 because the new rate is not affordable, but the local market is way down. Should I refinance or make a big cash prepayment to hold down monthly costs when the loan rate resets?
Answer:
Fixed-rate financing is available at roughly 3.6 percent for qualified borrowers at this writing. Reducing the current loan balance with cash will lower the monthly cost, but you will still face a steep rate in three years. The far-better choice is to refinance now, and then the issue of affordability will go away.
Look for a refinance and check out the Home Affordable Refinance Program. This program is available to borrowers who are not behind on their payments, but because of reduced equity, they cannot get traditional refinancing.
For details on HARP, see www.makinghomeaffordable.gov.
