The equity you have in any home, whether site-built or manufactured, depends on the difference between its current market value and the balance of your loan. This doesn’t necessarily mean, however, that investing your money a manufactured home is a good idea. Short-term equity often grows slower with a manufactured home and can easily disappear if the home depreciates in value.
Equity Growth Rates
Unless you pay for a manufactured home in cash and have instant, 100 percent equity, the chances are good that your equity will take time to build. This is due in part to the fact that many traditional lenders avoid servicing manufactured home loans even if you have excellent credit. The bulk of manufactured homes loans come straight from the home’s manufacturer. Interest rates on these loans can be as high as 6 percent to 14 percent. As a result, a larger portion of each monthly payment goes toward interest instead of paying down the principal and building equity.
Even though you can never say with 100 percent certainty that a site-built home will appreciate in value, its resale potential is better than that of a manufactured home. If a manufactured home doesn’t appreciate, a best-case scenario is that you’ll build equity up to the point where you own the home free-and-clear. A worst-case scenario is that you’ll lose equity over the long-term. The Manufactured Housing Association of Oklahoma websites lists factors that can affect whether or not the home may appreciate in value. These include the housing market, community in which the home is located, availability and cost of community sites and existence of an organized resale network.
The Great Equalizer
Land may the great equalizer in terms of building equity with a manufactured home. In an article on MSN Money, vice president of marketing at Champion Home Builders Kevin Flaherty asserts that a manufactured home can appreciate much like a site-built home if you’re a land owner and the manufactured home is permanently attached to your property. This means that you construct and attach the home to a permanent foundation with a basement or concrete slab.
You may not always be able to tap the equity in a manufactured home, no matter how much equity you build. Read the fine print in your loan or mortgage contract. Be proactive and ask in advance if you ever want to tap the equity in a manufactured home. Although some lenders will service home equity loans and home equity lines of credit on manufactured homes, others explicitly exclude manufactured homes or exclude manufactured homes by excluding any home on leased land. The only way to know for sure is to speak with your lender, especially if your manufactured home is permanently attached to land you own.
Based in Green Bay, Wisc., Jackie Lohrey has been writing professionally since 2009. In addition to writing web content and training manuals for small business clients and nonprofit organizations, including ERA Realtors and the Bay Area Humane Society, Lohrey also works as a finance data analyst for a global business outsourcing company.