Home Equity Options for Mobile Home Owners

As the owner of a mobile home, you’re already well-aware that banks don’t value your property as highly as they would if it were a traditional home. This may be why you’re wondering about home equity: can I get a home equity loan on my mobile home?

It’s a great question. If you’ve kept up with maintenance on your mobile home and now you’re hoping to cash out (or you’re looking to snag a home equity product to remodel your double-wide), you might be exploring your different HELOC and home equity loan options.

Here are the top things you need to know about home equity and modular or manufactured homes.

You’ll need to own land.

If your rent a space at a mobile home park, you won’t be able to get a home equity product -- even if you own your mobile home. Here’s why: Banks look at mobile homes as personal property (like a car) rather than real property (like a house). This means your mobile home will generally depreciate in value just like a new car does as soon as you drive it off the lot.

However, if you own the land where your mobile home is located, your land appreciates in value over time -- meaning there should be enough value in your land and home combined to qualify for a home equity product.

You can’t be underwater on your mortgage.

The amount you owe on your mortgage can’t exceed the value of the home. In other words, you’ll need to have some equity in your home already. To figure out if you have equity in your home, you’ll need the following information:

• Your home’s market value. Note that this isn’t the amount you paid for your home, it’s the current value of your home -- which is determined by the real estate market as a whole. To get a loose idea of the value of your home, type in your address and look at the estimates on Zillow or Trulia.

• The amount you still owe on your mortgage. Look at your amortization schedule to see how much, including fees like interest and PMI, you still owe on your mortgage.

Take the current value, subtract what you still owe, and this should give you a rough idea of your home equity. For example, if your property is valued at $60,000 and you owe $40,000, your home equity is around $20,000. This doesn’t mean you’ll be able to borrow a full $20,000, but it’s a starting point for estimating what you might be able to get.

You’ll need a permanent foundation.

Your mobile home will likely need to be permanently affixed to your land to qualify for a home equity loan program. This is part of the definition of a property being “real property” rather than personal property since a manufactured home that has a towing hitch or wheels attached is more similar to a vehicle than a home.

You’ll have better luck with a double-wide.

Though you might be able to get a home equity loan with a single-wide trailer, most banks have minimum size requirements to qualify. It depends on the bank, but since single-wide homes tend to be smaller (400 square feet to 1,000 square feet being the norm) they’re usually harder to secure a home equity loan against.

Your credit needs to be solid.

Just like with any home loan, a home equity loan requires a good credit score (620 or above). In addition to your credit score, your lender will look at your other debt obligations when considering whether to approve you for a home equity loan. While bad credit alone won’t necessarily make it impossible to get a home equity loan, it can certainly make it difficult to find one with good interest rates.

You’ll have to determine whether a home equity loan or a HELOC is best.

Your lender will help clarify the differences between the two types of home equity loans, but here they are in a nutshell. A home equity loan is a second loan that functions similarly to your original mortgage: it’s a lump sum the bank pays you, that you pay off in increments over time. A HELOC is a line of credit, like a credit card, that you can use on a revolving basis.

One last note before you start your hunt for the perfect lender: some lenders specialize in working with homeowners of mobile and manufactured homes, while others don’t. It really pays to find a lender who understands your situation, and home.loans is here to help! Contact us and we’ll help connect you with a lender who knows about mobile homes.