Financing Purchase and Reno
We are moving into the contract phase on a house in the slope that needs close to 300 thousand worth of work, about 1/2 for maintenance and mechanical issues and then 1/2 for inside finish out. We have bids for the work, but wanted advice on how you buy a house that needs work. What…
We are moving into the contract phase on a house in the slope that needs close to 300 thousand worth of work, about 1/2 for maintenance and mechanical issues and then 1/2 for inside finish out. We have bids for the work, but wanted advice on how you buy a house that needs work. What type of mortgages do you ask for? Do you take a mortgage to buy the house and then one to renovate the house? I know their are construction loans – are there loans for those of us that are buying houses that need immediate renovations? Do you need to submit contractors bids – architectural plans?
renogirl
I hope you notice my comment was not particularly addressed at you. Of course there’s plenty of sloppy or overcommitted or downright dishonest contractors. I just feel for the other side of the coin, the good ones.
I’ve posted contact info for several contractors all over this site (different kinds of jobs) and they’ve gotten plenty of wacky calls from them. (And calls from serious people too. ) I wonder what happened to that list the beleaguered B’stoner was thinking of putting together.
Anyway email me what you’re looking for. And who screwed up your work!
You have to get rid of the -nospam part of my address of course.
Response to LG — I thoroughly agree that there are honest contractors out there (would you like to post the name of the one you recommend?). I would be more than happy to pay someone for work done, but please give me the benefit of the doubt that I have unfortunately experienced the ‘other’ type of contractor, the unreliable kind.
I also understand needing to give some deposit (gotta pay for all that drywall somehow!), we’re all reasonable folks here (well…). I would be thrilled if you’d be willing to share the name of your ‘honest’ contractor! I am an ‘honest’ client just looking for same. It’s hard to find a good referral and I am admittedly sour over having dealt with the wrong people. I stand by what I said to the poster — don’t withold money a contractor deserves, but make sure they complete the work they agreed to.
HSBC also has a similiar program called “home renewal ” combines construction loan with primary mortgage for one closing. But they have very competitive rates.
We are in the process of finishing up renovations on our Bed Stuy bstone using a construction loan from Suntrust Mortgage. They bundle the purchase and renovations all under one loan, one rate. Everyone invloved on the bank’s end has been a pleasure. You will need a licensed GC to sign off on the work and agree to the job in writing before you can close.
Call Kathia at Suntrust:
631-454-3775
718-574-7324
Tell her Ari sent you.
Feel free to email me for any other questions. Good luck.
You might also note that the tax deduction for interest is limited to the interest paid on the first $100,000 of a home equity mortgage (whereas you get a deduction for interest paid on up to $1 mio acquisition debt). Also, acquisition debt is treated more favorably for AMT purposes.
This site is great for all this exchange of information, and renogirl just gave you a good example.
However …
I just got to say something about using your mortgage terms to keep your contractor in check. Something sounds really wrong to me about that.
I know a good and honest contractor who too often has to deal with people messing with him about the money and blaming their mortgage. I’m talking about agreed upon payments at the completion of work. People, it’s your responsibility and I don’t like you stressing out the good guys with these maneuvers!
People have posted here about a contractor needing to have the cash flow to cover you — well, that only goes so far, and might not be the case with a smaller outfit. Pay people for their work, and do it in a timely way.
Construction loans are for those who want to do the renovation costs right away.
The pros are that 1) you get the money for the reno and only have to put down one downpayment 2) You can build in usually about 9 months of mortage payments so you’re not paying, ideally, before you are able to live there, and avoid 2 mortgage payments at once.
The cons are 1) the rate on the construction portion of the loan floats until you are finished and you lock it in at the end, 2) I believe your overall rate on your base mortage (just the house itself) would be at least 1/4 percent higher, 3) I’m not sure if there are more closing cost, but it’s possible, and 4) you only get the money doled out in spurts as you finish the work, and an inspector comes by to make sure it has been done. Acutally, this migh be a ‘pro’, as it helps keep you and your contractor in check. They don’t get get any more money until they finish the previous portion, giving them incentive (this will come in handy, believe me!)
Banks that do construction loans are Wells Fargo, Countrywide, and I’ve seen Suntrust signs up around the neighborhood. Has anyone had any experience with them?