How do you refinance an upside down mortgage for a manufactured home?

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My husband and I bought a manufactured home back in 2001. Unfortunately, we were very inexperienced and did not understand that having money down at closing was so important. At the time, we also had bad credit, but the dealer was determined to sign us. We ended up buying down 7 points and rolling it into the cost of the loan along with the other closing costs in order to lower our interest rate into something we could afford. It was lowered from 12.5% to 10.75%. We have always made timely payments for the last 6 years, but would like to refinance to get the incredibly high interest rate down. Our current lender says that 10.75% is their lowest rate, and our credit union won’t finance due to the negative equity. The house is appraised at $ 81,000 and we still owe $ 92,000 on the loan. I’ve heard that there are loans available for 125% of a home’s value, but not if it’s manufactured. Does anyone know of any alternatives or have any useful suggestions to help us?
Also, just to clarify, the house is attached to a permanent foundation on a piece of land that my husband and I own.

  1. Reply
    January 28, 2011 at 4:10 pm

    Don’t be fooled, the 125% loans for other types of homes aren’t such a stellar deal either. I recently tried to borrow the remaining $ 18,000 of my home’s equity (the mortgage is for $ 72,000 and the appraisal was for $ 90,000) to do some repairs on the property.

    The interest rates they wanted to charge were obscene (in the 14 – 17% range and I have excellent credit.) They said it was because I wanted to borrow 100% of the equity; apparently the rates start climbing exponentially if you go above 90% of the equity.

    As for refinancing your loan, you might be able to do so if you have some other collateral you are willing to put up to secure the loan. (In other words, if you have something else of value that the lender could take if you fail to make your payments.) Some things they might consider would include any investment accounts you might have, cash value on life insurance policies, and/or other real estate (including land.) However, you do run the risk of losing not only your home, but also the other collateral if you go this route.

    Typically you would have better success with a local bank than shopping through the secondary market for this type of arrangement.

    Best of luck!

  2. Reply
    January 28, 2011 at 4:45 pm

    You are throwing terms around with convoluted meanings. Manufactured Home (Trailer home)? Trailer Home worth $ 81,000 – most unlikely. This is most likely a prefab home that is on a foundation.

    Now you have a property that is OWED MORE THAN THE VALUE APPRAISED. Ask the current lender if they would be willing to re-write the property for a smaller amount of debt at the same interest at a higher rate of pay. Then you would have another entity write the other debt at a lower interest rate. In the short term you will not save anything. Long term, you will pay off the over value and establish equity.

    The current payments ($ 800 + $ 75 ins + $ 125 tax) $ 1000
    change to $ 56,000 @ 7% ($ 350) & $ 36,000 @ 10.75% (pay off in 5 years). IT IS THE CLAUSE OF FIVE YEARS THAT PERMITS THE CURRENT COMPANY TO MAKE THE DEAL. The current company would get $ 56,000 from the (credit union) who will give you a first position martgage and the balance from you in monthly payments (which when added to the credit union equal the $ 800 listed above). NONE OF MY FIGURES ARE CORRECT, THIS IS JUST AN ELLISTRATION OF WHAT IS BEING PROPOSED.

  3. Reply
    January 28, 2011 at 5:14 pm

    The highest LTV you’re going to get on manufactured right now is about 90%, and that’s even if you can find a bank to do it, because they’ve been avoiding manufactured like the Plague lately. Reason being is that property values are on a down trend, and the first properties to drop in value are mobile and manufactured homes.

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