High Interest Rates Curtail Sales of Manufactured Homes

Manufactured homes are among the few types of affordable housing being built today, but the high interest rates being charged on manufactured-home loans are driving up buyers’ costs and hurting sales, according to a finance consultant to the industry.

David J. Leichey of Palm Springs-based Meetings+Plus says interest rates on manufactured-home loans now stand at about 14%, compared to about 10 1/2% for loans on conventional houses. Lenders charge higher rates on manufactured homes under the assumption that the loans are riskier, even though statistics show that the foreclosure rate on owners of manufactured homes is “significantly lower” than those for conventional houses, Leichey says.

Leichey also says that lenders who make loans on manufactured homes usually insist that the loan be amortized over 20 or fewer years, compared to 30 years for conventional homes. As a result of the shorter repayment term, “the manufactured-home buyer can wind up with higher mortgage payments, even though the manufactured home didn’t cost as much as a conventionally built house.”