Question:
I’ve decided to remodel my existing home and I’m looking for recommendations on financing. I’ve thought of three. … The first is to cash-out refinance and use the cash from my equity. The problem, or better yet, the question is…do you think a bank appraiser would appraise a home where in a $245k – $279k area for $350k? I need about a $279 loan to pay off my existing mortgage and have the appropriate cash to remodel. However, as you see above, $279 is the top of the price range for comparable homes sold nearby, and is actually what I’m sure I can get for mine. I know this may sound like a stupid question, but with this crazy real estate market in the NorthEast, I’m thinking anything is possible. Do you think a bank appraiser would raise the appraisal to sell me the loan by "broadening" the comparables to a larger/higher priced radius? The second option is a home equity loan. However, I think I’d be dealing with the same issue as the first option, because I’d be relying on my equity.Also, the rates seem less favorable than other choices. The third and final option, is to take out a construction loan to remodel my home. This I want to avoid, but it may be the only route I can go. I see this option as more risky because my mortgage rep says I can lock in on the currently historical low rates, but the rate will float and cap at a percent higher or lower. This can cost me considerably more if the rates rise an entire percent while I have my "floating" lock. I also will have more fees. Is this a common option for what I’m looking to do, and do you recommend I go this route over options 1 & 2? Thanks for taking the time to read this.
Response:
- Hide quoted text — Show quoted text – > I’ve decided to remodel my existing home and I’m looking for recommendations > on financing. > I’ve thought of three. … > The first is to cash-out refinance and use the cash from my equity. The > problem, or better yet, the question is…do you think a bank appraiser > would appraise a home where in a $245k – $279k area for $350k? I need about > a $279 loan to pay off my existing mortgage and have the appropriate cash to > remodel. However, as you see above, $279 is the top of the price range for > comparable homes sold nearby, and is actually what I’m sure I can get for > mine. I know this may sound like a stupid question, but with this crazy real > estate market in the NorthEast, I’m thinking anything is possible. Do you > think a bank appraiser would raise the appraisal to sell me the loan by > "broadening" the comparables to a larger/higher priced radius? > The second option is a home equity loan. However, I think I’d be dealing > with the same issue as the first option, because I’d be relying on my > equity.Also, the rates seem less favorable than other choices. > The third and final option, is to take out a construction loan to remodel my > home. This I want to avoid, but it may be the only route I can go. I see > this option as more risky because my mortgage rep says I can lock in on the > currently historical low rates, but the rate will float and cap at a percent > higher or lower. This can cost me considerably more if the rates rise an > entire percent while I have my "floating" lock. I also will have more fees. > Is this a common option for what I’m looking to do, and do you recommend I > go this route over options 1 & 2? > Thanks for taking the time to read this.
You could do a rehab loan, which would appraise your house for what it would be worth after the renovations are complete. You would pay a slightly higher interest rate, but not astronomical. If you take out a 2nd, and your home does not appraise for enough, you could be faced with getting an over equity loan (up to 125% of your home value). Those loans have pretty high rates. It might be worth it to try the appraisal as is, then choose your program based on the value that the appraiser gets. I have an appraiser that only charges $250, but he is only in MD. www.loansbyjosh.com
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