Often referred to as a second mortgage a manufactured home home equity loan gives the homeowner the option of borrowing money against the equity they have built up into their home. These types of loans allow the homeowner to borrow up to $100,000 and deduct the interest paid on their yearly tax returns.

When considering a second mortgage there are two types to choose from; a fixed rate loan or a line of credit. Both of these loans will have terms that range from five to fifteen years and they must be paid in full if and when the house is sold.

Lets take a look at how these two types of loans work. First the fixed rate home equity loan allows the borrower to receive a lump sum payment for the amount loaned that can be used anyway the homeowner wishes. The monthly payments and interest rate remains the same during the life of the loan making this type of loan easier to budget for.

A manufactured home equity line of credit works differently then a fixed rate loan. It normally comes with an adjustable or variable interest rate meaning that the rate is tied to daily fluctuations of the rates banks charge. The borrower is approved for a certain amount that can be accessed with either a bank provided credit card or special checks tied to the loan account.

The monthly payment is a little different with a line of credit equity loan. It is dependent on how much of the loan amount has been used and the current interest rate. This means the monthly payment can vary and needs to be accounted for in the monthly budget. It is also important to understand that when the term of the loan is up all outstanding balances must be paid in full.

One of the big advantages of a manufactured home home equity loan is the homeowners ability to get a large amount of cash fairly quickly. This money can be used to pay down debt, tuition, home improvement or remodel projects, a once in a lifetime vacation, or other unexpected expenses.

Another advantage of this type of loan is the interest rate. It is normally lower then other types of loans and the interest that credit cards charge. By paying off outstanding balances on credit cards using a home equity loan the borrower can consolidate their debt into one monthly payment with tax deductible interest.

A manufactured home home equity loan can be a good financial tool for homeowners who need a large infusion of money at low interest rates. It is important to weight the advantages and disadvantages before signing the closing papers to make sure this is the best choice to make.

(more…)