Construction Loan

[ny96]

We are looking into getting a loan to cover our very extensive remodel and we don’t know where to start. We checked in with our mortgage broker and he does not deal in construction loans. Next we thought we’d go to our bank. We’re still in the preliminary stages. We have the remodeling plans drawn up, but are still trying to figure out the costs and who would do the work.

[icedcoffee]

How about a HELOC? We got one from a credit union.

[ny96]

Aug 27, 2020 20:47:59 GMT -5 icedcoffee said:

How about a HELOC? We got one from a credit union.

Thanks, I didn’t think about that because of the amount we are looking to borrow, but I used a heloc calculator and it looks doable.

[madisen]

Not sure what very extensive means from a $ amount perspective but here’s a great article on home improvement loan options.

www.nerdwallet.com/best/loans/personal-loans/personal-loans-home-improvement

If it were an entire rebuild or new land, there are also consutruction-to-perm(anent) loans that are mainly offered by banks.

[aksinger]

We did a large (square feet wise and $ wise) addition two years ago, we got a construction loan from the same bank we had our mortgage with (local credit union). A HELOC would not have been enough. The construction loan paid off the original mortgage, paid out installments to our contractor as the work was completed, and then we rolled the construction costs plus old mortgage into one new mortgage.

It was a variable interest rate while construction was going on (5 months), but we only paid interest on the work completed and paid for. No interest on the original mortgage amount. So for a lot of the time the interest was pretty minimal until the construction really got going and then close to being done. The paperwork was a pain in the ass overall, but in the end it worked out ok and I couldn’t be more thrilled with having done the addition.

[ny96]

Aug 28, 2020 1:29:06 GMT -5 aksinger said:

We did a large (square feet wise and $ wise) addition two years ago, we got a construction loan from the same bank we had our mortgage with (local credit union). A HELOC would not have been enough. The construction loan paid off the original mortgage, paid out installments to our contractor as the work was completed, and then we rolled the construction costs plus old mortgage into one new mortgage.

It was a variable interest rate while construction was going on (5 months), but we only paid interest on the work completed and paid for. No interest on the original mortgage amount. So for a lot of the time the interest was pretty minimal until the construction really got going and then close to being done. The paperwork was a pain in the ass overall, but in the end it worked out ok and I couldn’t be more thrilled with having done the addition.

Thanks. We estimate that the remodel will take about a year so paying interest on only the work completed may be the advantage of a construction loan.

[ny96]

Aug 27, 2020 22:42:34 GMT -5 madisen said:

Not sure what very extensive means from a $ amount perspective but here’s a great article on home improvement loan options.

www.nerdwallet.com/best/loans/personal-loans/personal-loans-home-improvement

If it were an entire rebuild or new land, there are also consutruction-to-perm(anent) loans that are mainly offered by banks.

We’re looking to remodel our existing first level, add a second level, and build at least 1 retaining wall.

[cuadrado]

We got our construction loan through TD Bank and the rate was really good. We were happy with them overall. We ended up refinancing the house after construction was over because TD Bank’s online system was antiquated and annoying, and we got an even lower interest rate with a refinance.

[quesyrah]

We got our construction loan through US Bank. We added a 750 sq ft. apartment to our house for my MIL. We got a 15 year loan at a great rate and their process was very easy.

[ssmjlm]

I have only done a construction loan for a new build. We had to get an appraisal that met the contract amount and then put down 20%. We only paid on the drawn amount interest until completion. Each draw was pretty extensive requiring inspection, checking for liens, etc.

The hardest part for us was finding comps in our area to make the appraisal. We started with a local bank, but they were useless, so we had to go to another lender. They wanted to use Ryan homes as a comp, LOL Forever.

[ny96]

Aug 31, 2020 8:44:12 GMT -5 ssmjlm said:

I have only done a construction loan for a new build. We had to get an appraisal that met the contract amount and then put down 20%. We only paid on the drawn amount interest until completion. Each draw was pretty extensive requiring inspection, checking for liens, etc.

The hardest part for us was finding comps in our area to make the appraisal. We started with a local bank, but they were useless, so we had to go to another lender. They wanted to use Ryan homes as a comp, LOL Forever.

Thanks. If we go the construction loan route then I don’t think comps are going to be an issue. We have the smallest house in the neighborhood and this is the best way to add value.