Home Loan advise? Remodel and Addition

11 years ago

I am looking into a renovation/remodel of my current home. Let me start with some background information.
My house/land are fully paid for and are appraised at $85,000. The house we are in was built in the 87 by my family and has some measure of sentimental value however it was originally built for 2 people and we are bursting at the seams. Additionally the construction work is not professional grade and so there are areas of the house that are wearing out such as the foundation (built on blocks) and electrical.
I have no intention of moving. I was raised in this small community and plan to do the same for our children. We have looked at new construction but would have to factor in the cost of demo on our current house and the cost for that and construction would far exceed a reno/addition.
We are considering a plan that adds a new master bed and bath, an updated kitchen and an additional room so that each child (boy and girl) can have their own room and closet.
Our house is currently 1000 sq feet including an upper loft.
We are looking at closing in the upper loft and adding dormers to create bedroom space upstairs for the kids and expanding the downstairs some to include a master bed/bath and. The additions would be approximately 500 sq feet or less. The renovation portion would allow us to finally tie in to a proper sewer line, restructure the kitchen, and fix the roof and foundation problems. Additionally we currently only use a wood burning stove for heat and a small window unit for cooling so we are adding a central air and heat.
I am working with an architect to design a new space and the current estimate is around $100,000
We have the enough for 15% down although and look at being able to pay the loan off in 10 years.
My question is what type of loan would work best for us? I have placed a call to our local bank and have an appointment with a lender there however I am interested in a second opinion.
Thanks!

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Comments (5)

PRO
LMP Designs
11 years ago
You have a couple of choices but the one that probably makes the most sense and the "cheapest" money, would be to take out a first mortgage on your home. Since you currently own the home "free and clear" interests rates are at historic lows and, depending upon your geographical location, you should be able to get a mortgage somewhere in the neighborhood of 3.5%-4%, with a monthly payment of around $600, for 15 years. Obviously the payment would be higher to pay off the loan in 10 years. The problem with this option and also a HELOC (home equity line of credit), is that most lenders will not loan 100% of the homes value, which is what you need, $100,000-15,000 (your 15% down)= $85,000, which is the current appraised value of your property. So unless you can find a lender who will loan 100% of property value, you may have to get real creative. Is it possible to phase the remodel? Do some now, pay off the loan, do the remaining later? Also, a HELOC works in a very similar way that a credit card does, as you pay down the loan, more money is available and you wouldn't need to take out another loan.
allieundercover
Original Author
11 years ago
This is so helpful. Thank you! and yes.. we are already working on a plan so that we can do the house in 3 phases to stay somewhere around 1/3 of the appraised current value.

Have a wonderful day!
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PRO
LMP Designs
11 years ago
You're welcome! Good luck with the remodel :-)
PRO
LMP Designs
11 years ago
You're welcome! Good luck with the remodel :-)
emma
11 years ago
I am just guessing here, but a home built on blocks may not qualify for a loan. We have homes here built for A/C workers during the war that are on blocks and they can't be insured so they can't get a loan. My husband bought the one he was living in when the government sold them. He kept it for rental and when we tried to sell it we found out they don't qualify for loans, none of them. We sold it at a lower price for cash. Your home renovation may be a total loss when/if you ever sell it.

Home Loan advise? Remodel and Addition

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allieundercover
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Home Loan advise? Remodel and Addition

Comments (5)

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allieundercoverOriginal Author

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allieundercover
Original Author