LENDING OPTIONS
Home Equity Lines of Credit & Home Equity Loans
If you have equity in your home currently that is enough to finance your construction, a home equity line of credit (HELOC) may be the best way to pay for your project. A HELOC may also be the best choice if you have a low interest rate mortgage currently that you want to keep in place.
HELOC's are typically variable rate mortgages though there are some fixed rate options. Your required payments are interest only, but you can pay principal at any time without penalty. Payments are based on the amount of money you have accessed in the line of credit so they will vary as you use funds for construction or pay down principal.
A home equity loan is an option for all of the same reasons as a HELOC but you want a fixed interest rate. There are home equity loans that only require interest payments and others that require you to pay principal and interest. Home equity loans typically have a fixed payment amount.
Construction Loan
A construction loan is best for bigger projects, custom construction where you are starting from bare ground and projects where you don't have equity in your home at its' current value to pay for your construction. The loan amounts available are based on the value of your property after construction is completed. A qualified appraiser will use information on your home as it is and your plans and specifications to determine that value. Payments on the construction loan are interest only and are based on the amount of money you have used to that point in construction so they will go up as the project continues and you pay for construction. There are a couple of options on how a construction loan can be structured but for all of them, your current first mortgage will be paid off and you will have a new permanent mortgage at the end of your project. A construction loan can be used to purchase the land you need for your new home.
Cash Out Refinance
If you have enough equity in your home that you want to simply have the money to fund your construction all in one step, a cash out refinance provides that for you. Your new loan will be based on current market interest rates. You can choose the loan term that you prefer to give you the payment that works best for you and the payoff time that is optimal for you. Most refinances have a required principal and interest payment though there are some interest only options.
All loans are based on your personal financial circumstances and your goals for the project.
We will start with a detailed conversation and move to an application and scenarios you can use to make your choices.
HAVE QUESTIONS?
Whether you are building a custom home, starting a remodel or designing an ADU for your exisitng property we understand that there are so many questions along the way. It is our goal to be resource for your building experience, please check out or blog page for more FAQ's and general information. And of course if you would like to speak to a human, we are just a quick phone call away!