Stupid question about home improvement, loans, home equity etc.

[Faery-Wings]

My hubby and I want (need) to put an addition on our house. We had someone come in and give us a very rough estimate of $30,000. How do you pay for that? We have some equity in our home now, and a bit of cash in savings, but not anywhere near that figure. Do you put the loan amount into your mortgage? Or take out a new loan? Or is it smarter to pay off some and finance the rest? Questions, questions!

Has anyone put an addition on? I would love any advice you have to give.

Chris

[StarryDancer]

Not knowing your income levels (and don't you dare post them here!), it's harder to say. In general, if you already have some equity in your house, you could go for either home equity/home improvement loan, or try for a second mortgage.

Best rule of thumb in any of this is: the more you can pay off sooner, the better off you are!

[Arduinna]

There are so many issues involved in the decision, that I don't think anyone on a message board can say which loan is best for you. I would go to my loan officer with the lender that carries my mortgage and find out my options.

The usual choices are a line of credit tied to your equity, a second mortgage, or refinancing your first trust deed to include the amount you need to pay for the improvments. Not all the options may be open to you though, depending on your financial situation.

The benefits of the line of credit is that it is available for whatever you need it for up to the limit. You won't have to borrow say 40,000 and then owe that money if you don't need it all. There is a littile more freedom with a line of credit. But check out the interest rates, points invloved, what interest will or won't be tax deductable ect.

Time for a trip to a professional that can hep you make the right decision for you.

[Old Witch]

Arduinna gives good advice!!!

[materra]

Also be very, very careful with your lender...my bank was not my best choice. All home equity loans are not created equal, and some are not even deductable from income tax even if they let you think that. Be very careful please. Go to the best resources you know and check with a tax person too.

You will love your new home addition, just make sure it is not a burden you cannot bear. BB.

[Persephone]

Very good advice has been given here. I used to work with home loans for a small bank. Important points:

The bank can't tell you if the loan will be deductible - they should tell you to check with a tax professional

I would avoid mortgage brokers, as they tend to be more expensive

Small community banks often have special programs which may save you money

If you can refinance to a lower rate, you may be able to save yourself money in the long run, even with a higher loan amount

If you get a 2nd mortgage with an equity line then you only need to borrow the amount you will actually use; if you refinance you *should* be able to take any money you didn't use to pay down the principal (thereby not paying interest on it anymore)

Refinancing or getting an equity line will cost money, for closing costs, title searches, appraisal, etc.

Talk to a banker - they can help you find the best options

Good Luck!

[Faery-Wings]

Thank you for your advice. It is always good to go forewarned, especially the point about deductible.

Hubby and I have to sit down, do a bunch of research and get an architect too.

Wouldn't it be easier to just dig a cave? :p

Chris

[materra]

Um, just say no to caves...they have problems with dampness and don't hold the equity very well. :D

Be sure to check out any contractor and workers you use. That is a whole other nightmare. BB

[flar7]

whatever you do, get it in writing with a reputable contractor. Better business bureau can help there. You will want to know
certain things. How long will I have that hole in my roof? Are
you going to fix the yard after parking your crap on it? exterior
access to utilities(electricity, which you will be paying for)
Liability insurance? workers comp covers what and what on my
property am I responsible for?

I have done a lot of construction and these are just a few points
to think of. Time is always critical on a remodel, because you are
exposing the interior of the house(at some point) to the elements.

[Faery-Wings]

Blargh. (to borrow a quote from Danustouch) Now hubby wants to move...........

What is with you men?

;):huh: :wah2:

[Old Witch]

They just don't realise how much STUFF accumulates.................

[Myst]

Originally posted by chryssi1
Blargh. (to borrow a quote from Danustouch)

actually she got it from me and I got it from Dellit. heh :lol:

[Autumn]

Moving *might* be simpler. My Dh breaks out in a cold sweat at the idea of building anything. We bought a "contractors home" it is beautiful but we find stupid stuff all the time. insulation mistakes, 39cent outlets where the cord falls out if you look at it wrong, a hump in the middle of the livingroom we found as we tried to have hardwood floors installed. The squirrel who bulit the house wouldn't even return our call even though we would have payed him for the repair, another contractor got it... I could go on....

He also has to do with construction projects around his place of business. He's the money guy and has to put up with all kinds of flakey stuff

I would move if I were you:)

[Lavender]

Don't know if anyone else had mentioned this. But go to at least 3 or more lending institutions to get quotes. Then, don't be afraid to go back & bounce one off the other to get the best rates. You'll be surprised at what a little competition will make these people do! :D