When buying a manufactured home, many buyers start with a chattel loan, especially if the home isn’t placed on permanent land right away. Chattel loans can be quicker to secure and are often used when purchasing a manufactured home as personal property instead of real estate. But here’s a question many homeowners eventually ask: Can I switch from a chattel loan to a traditional mortgage later?
The short answer?
Yes, it’s possible. But, there are a few steps and requirements you’ll need to meet first. Let’s break it down.
Understanding the Difference
Before talking about switching, it’s important to understand the key difference between chattel loans and mortgages for manufactured homes:
- Chattel Loans: These are personal property loans. They finance the home itself, not the land it sits on. They typically have shorter loan terms (15–25 years) and higher interest rates than mortgages.
- Mortgages: These are real estate loans. They require the manufactured home to be permanently affixed to land you own (or are buying) and classified as real property. Mortgages often have longer terms and lower interest rates.
How to Transition from a Chattel Loan to a Mortgage
If you currently have a chattel loan, refinancing into a mortgage is possible once your manufactured home meets mortgage eligibility standards. Here’s how that usually works:
- Place the Home on Land You Own
To qualify for a mortgage, your home must be on a permanent foundation and located on land you own (or are financing). If your manufactured home is currently on leased land, switching to a mortgage may not be possible unless you purchase the land.
- Convert the Home to Real Property
A key step is legally converting your manufactured home from personal property to real property. This involves following your state’s process for “title surrender” and “affixing” the home to the land in official records.
- Meet Mortgage Lender Requirements – Most lenders will require:
- The home meets HUD code standards (built after June 15, 1976) or other local requirements
- The home is permanently installed on an approved foundation
- The home is in good condition and meets minimum standards for the municipality
- Refinance the Loan
Once your home qualifies as real property, you can apply to refinance your existing chattel loan into a manufactured home mortgage. If approved, your new mortgage will pay off the chattel loan, potentially lowering your interest rate and extending your repayment term
Why Switch?
Refinancing from a chattel loan to a mortgage can offer several benefits:
- Lower interest rates: Mortgages typically cost less in interest over time
- Longer repayment terms: Lower monthly payments can free up cash flow
- Build equity: Owning the land and home together increases property value
That said, there are also costs to consider, such as closing costs, foundation installation, or land purchase. It’s worth running the numbers to see if the switch makes financial sense.
The Bottom Line
Yes, you can switch from a chattel loan to a mortgage for your manufactured home, but only once your home is placed on permanent land, converted to real property, and meets lender requirements. The process involves a bit of planning, but it can result in better loan terms and long-term savings.
If you’re thinking about making the move, start by talking with lenders who specialize in manufactured home loans. They can walk you through the steps, estimate your potential savings, and help you decide if refinancing is right for you.
Looking for the best financing options for manufactured housing?
At ManufacturedHomeLoans.com, we connect you with trusted lenders and provide clear information so you can make confident decisions about your home’s financing, whether you’re buying, refinancing, or just exploring your options.
