Why a higher interest rate on modular home mortgage?
Renting & Real Estate
me asked:
We were hoping that building a brand-new modular home would be the answer to our VERY frustrating and discouraging search for a new home.
We were hoping that building a brand-new modular home would be the answer to our VERY frustrating and discouraging search for a new home.
But when my husband called the mortgage company today, they really burst that bubble! They say the interest rate will be higher on a modular. We are not talking “doublewides” here… My husband and I really had our eye on a couple of higher-end models that look as good as any other house I’ve ever seen. Better, even!
So, why the higher interest rate? And how much higher would it be? My dear husband did not press her for answers, but I want to know. Thanks…
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October 4th, 2008 at 7:42 am
It sounds like you called the wrong mortgage company! Check with your salesman who will sell you your modular home, they have mortgage companies who are willing to please. You’ll find much better rates. They should be no different than for a stick-built, site-built home.
Good Luck!
October 5th, 2008 at 11:27 pm
Banks feel that a conventional home will be worth more in the future than a modular home. Therefore, they are charging you a higher interest rate.
October 8th, 2008 at 8:48 am
Call some more mortgage companies.
A modular home is NOT a manufactured home. It should haver zero bearing on your rate.
Not many loan officers know how to handle these things. Does the supplier have any bankers they refer people to?
Start dialing for dollars. There’s another, better banker out there somewhere waiting for you. You just gotta keep looking.
October 9th, 2008 at 5:30 am
It’s my understanding that the rate can be as much as double, so, possibly, 12% or better. That’s because these homes don’t appreciate as much as a traditional home (the buyers market is smaller, there are still some people with negative feelings about modular homes), they can be moved (literally, someone could drive away with the banks equity), but most importantly, because there is a higher rate of loan default with modular homes. Why there is a higher default rate is immaterial. Statistically, the loan is higher risk than a traditional stick built home.
It’s still a secured loan though, so you won’t pay rates comparable to credit cards, for example. And, of course, the interest is still deductable.