Posted by James on May 15, 2010 at 22:13:06:
That’s my 2 bits. yes.
Need advice on how to finance an addition - Posted by amber
Posted by amber on May 15, 2010 at 09:14:50:
My fiance bought a rental home from my parents and they financed the deal. It is now our primary residence. Appraised at $110,000, bought for $80K but after gifts of equity, financed for $54K, 3% interest, 30 years. So, first mtg with parents. We want to put on a $60K addition. Went to the bank and the only way they’ll do it is if they can re-fi first mtg and then do construction loan for the addition so when all was said and done we’d have one mtg with the bank for $110K. We don’t want to do this. Why? In addition to the hassle of construction loans: 1) rate with mom is great. 2) if mom and dad are paid off, they’ll have capital gains tax they don’t want. As it stands now, since they have mtg with us, they only pay a portion of capital gains tax each year. So how do I do this? I have only shopped at the one bank so maybe I just need to keep looking. Should I (can I) move mom into 2nd position and try to get a 1st mtg with another bank (this bank didn’t want to do this). Is there a way to re-fi with the bank for $54K to pay off 1st mtg with mom, and then have mom re-loan us that cash to do the addition but restructure the loan with her somehow so that she still has the capital gain advantage as it was when she held the mtg for us. I hope this makes sense. I need some help figuring this out. Any help is appreciated. Thanks in advance.
Re: Need advice on how to finance an addition - Posted by James
Posted by James on May 15, 2010 at 13:37:30:
Before you start the loan process, the very first thing you guys need to take a good hard look at your situation. Will the additions you want to add to the existing property add value to the property? In other words, will the money you spend come back to you if you need or want to sell? Have you spoken to a contractor who could do the work for you? Do you have plans drawn up? Unless I’m wrong, if you get a construction loan, you will eventually have to refinance that loan and that is if the property will appraise for at least 20% more than the cost to construct. There may be a place where you could get a new first mortgage if your parents will take a second position. But make sure that the property will appraise where you need it to be Ii believe that the property will need to appraise about $145k or better. Take the plans to an appraiser that is experienced in construction and have the property appraised. It would be cost effective to do this before you start construction ans=d find out that most of your additions did not add value to the home.
Re: Need advice on how to finance an addition - Posted by amber
Posted by amber on May 15, 2010 at 21:48:38:
Thanks, I should have mentioned that too. Yes, we have bids and an after completion appraisal that came back in the range of $140K-$145K. So you think I should just keep shopping banks to see who may do a 1st if mom goes 2nd?