Need Advice on Second Mortgage or Creative Financing Options for building second home (loan, 2015)

[act532]

Hello,

Thank you in advance for your advice.

I'm interested in building a new house but at the same time I have a mortgage payment. I moved in to my new home last April and would like to know what type of options I have to be able to build a new house. I hope someone out there has been or going through this process.

I know that the best way to do this would be to sell my current home and then starting building the new home, that way I don't have two mortgage payments.

I owe $150,000 and monthly payment is $900.

I would like to know what you think or if you have any type of ideas that might help.

Thank you once again.

[kevcrawford]

You need to speak to your lender about that. They're going to best be able to analyze your finances and tell you what would work best for you.

You know better than anyone on CD whether or not you can afford two mortgage payments. Depending on what you're looking to build, that can take anywhere from 4-12 months. You also need to consult your Realtor about whether or not you will be able to sell your home in that time period, and how much you'll net.

Being that you just moved into the home last April, you most likely won't be making too much on the home, if anything.

Call in the experts. Asking folks on CD really won't help you at all, because we don't know anything about you or your financial situation.

[sinsativ]

Very good Kev, true, all we have is opinions, I offer mine, I would sell first, then start building. You could be selling for a year or more before it gets done. Even if you have to live in an apt for a temporary time its better than having 2 mortgages and an unknowing of when its going to end.

[LindaGrace]

You bought a house in April and now you want to sell it and build a new house? Can you not stay in your current house for a year or two?

[act532]

I'm just looking to see if someone had a good idea for me.

[chet everett]

Here is my advice: Odds are hugely stacked against anyone being able to recoup the transaction costs of a home purchase from last April. Put you dreams of a new house on hold. Pay off a substantial portion of the house you are currently living in and do everything you can to make it as sellable as possible. Don't plan on leaving your current home for 5-7 years.

If you still have a burning desire to build a new home in 2015 or so then start setting aside every red cent you can lay your hands on. Take that pile of pennies and put it into the most locally run bank / credit union you can find. Beg them to give you a construction loan based on your record of thrift over the past 5+ years and a realistic selling price for your existing house. In such cases they will structure a construction loan that will convert into a mortgage upon completion and if you have the existing home all ready to sell they might even let your debt::income ratio get a little out of whack if the equity that you have in your current home is substantial...

To do pretty much anything else is MADNESS!

I don't care if you just had quintuplets and you have a two bedroom or you just found you need a wheelchair and you current house in a three story -- there is almost no way that the costs of new house are justifiable / less than making your current home meet your needs through renovation.

If you want to relocate then I suggest that instead of building new you rent in the new locale...

Spending too little time in a house in a market that has largely had negative price movement is a recipe for disaster.

[LuminousFive]

Hi ACT,

First, your financial situation has a lot to do with this decision. I would suggest taking a serious look at your finances to see if this is the appropriate time for you to build.

I would recommend building up a bit more equity in your current home before you decide to build. Just staying in your home for another two years or so will give it time to appreciate in value (assuming the market continues to recover) and gives you time to save a good bit of money.

Most lenders for construction are requiring an 80% loan to value, meaning that if you want to build a house that's worth $200,000 most lenders are only willing to lend about $160,000. Look to put about 20% down. You can get that down a bit, depending on the appraisal.

I would really suggest talking to your lender or at least to a responsible home builder (for goodness sake not a big production builder!) who can give you information on financing.

My wife and I are in a similar situation. We purchased a bit of property to build our home on. We are waiting a few years to build so that we can build up equity in the property and borrow against it to cover the down payment. In the mean time we live rent free (thanks to the army). Just make sure you are ready before you jump in head first. The worst case scenario is that you build a house you can't afford and then end up being foreclosed on.

Good luck!

[broadbill]

Originally Posted by LindaGrace

You bought a house in April and now you want to sell it and build a new house? Can you not stay in your current house for a year or two?

A year or two? How about 10-15 years?!? heck, it takes something like 5 years alone to recoup what you paid in closing costs!

Gone are the days of staying in a home for 2-3 years, generating 50-75K in equity and moving up to a larger house. You will be lucky to even get a buyer for your house, let alone breaking even on the deal.

[kittykat13]

I agree with all of the last posters, you definitely need to talk to your lender. There is a lot at stake here.