I want to put a large addition onto my home will the lenders allow me to use the anticipated new value of my home in concidering the loan amount and where do I start? with the bank or the contractor. how do I figure the amount of money I will need to borrow. can anyone suggest a book for someone in my situation.
2007-01-04 09:01:27 · 5 answers · asked by charles p 1 in Business & Finance ➔ Renting & Real Estate
What you need is a construction loan, which DOES work with the FUTURE value of your home. However not all banks do construction loans.
Usually you will need some concrete plans of what you're doing-- architectural drawings, perhaps, and then they have an appraiser value your house based up on the PLANS for the house. Then, usually, a bank would dispense partial amounts of the loan prior to each major step, and after the previous step has been inspected by the bank and deemed complete. Usually during construction you would pay interest only on the loan amount currently oustanding, and then at the end it converts to a traditional mortgage.
You'll have to call some diff banks and ask what they're requirements are. When I was doing this, is was usuing a well known builder in the area for a completely new home, and they were known for having a higher value when done then what the cost was, which made the banks happy to work with them. Hopefully you have atleast SOME equity now so that it makes the loan process easier as far as the bank having confidence it will be worth more than the loan in the end.
2007-01-04 09:07:00 · answer #1 · answered by Anonymous · 0⤊ 0⤋
The Lenders will not use the future value of you home because that is not the only factors that decide the value of your home. The Lenders will always go with what the current property is worth NOW. Also you should consult a costruction company first of how much you will need or an estimate, then you refinance your house according to how much you need for the work you need done. You should allow 10K to 15K for grace amount in case the contrator has any problems that he did not forsee.
2007-01-04 17:15:23 · answer #2 · answered by John T 2 · 0⤊ 0⤋
No, they won't. The cost of home remodeling, regardless of whether it is new carpet, countertops, or even an addition to the home, will always be higher than the increase in the value of your home.
If you are talking about a home equity loan you are using to finance the remodel, the banks will always look at what your home is worth now. Too many factors can affect the value of your home in the future. The economy could go into the toilet and the value of your house could plummet tomorrow.
2007-01-04 17:06:24 · answer #3 · answered by jseah114 6 · 0⤊ 0⤋
The lender will consider the current appraised value of your home. The amount you can borrow would be the amount your home has appreciated (how much more it is worth now than what you paid for it) plus how much you have paid into principal.
For example:
You bought your home for $200,000.
It is now appraised at $400,000.
You have paid $50,000 total into principal.
You have $250,000 worth of equity in your home against which you can borrow money. What you are borrowing against in a home equity loan is how much you would actually profit if you sold the home today. If you can sell your home for $400,000 and have $150,000 left on the mortgage, then you have $250,000 in equity. This way, the bank knows that they can recoup the money you owe them via sale of your house, should you default on the loan.
And jseah is wrong - remodels generally add more value to your home than they cost. Of course, not always.
2007-01-04 17:04:57 · answer #4 · answered by Phoenix, Wise Guru 7 · 0⤊ 0⤋
I spent a breif time in the mortgage bus. and if you can show how much the improvment will increase the value of you house, they should loan you a percentage of that amount.
2007-01-04 17:07:48 · answer #5 · answered by bob d 2 · 0⤊ 0⤋