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Last spring I bought a house for under $10k. It took a few thousand more to make it habitable, then another $10 to start get a start on real improvements (jacking up the worst part of the foundation, adding a laundry room). So far I've done all this with cash (bought the place with ccs and a loan from a friend, then paid that all back when I sold my other house).
This year it's going to need a new roof and the rest of the foundation work, and after that there's probably another $10-15k of other work to do before the place is no longer an embarrassment to the neighborhood. So I'm looking at $20-25k in long-term expenses.
I don't have much of an income, but I do have good FICO scores, decent CLs and low utilization on my ccs. I could finance the work that way, over a period of years, if I needed to.
I'd really rather get a small mortgage, though. That would let me do everything at once and stretch the payments out for a longer time with lower interest.
But is anybody anywhere going to give a $25k mortgage? If they did, would the upfront costs take up some insane percentage?
I'm thinking of going to the small regional bank where I have my accounts, but I thought I'd get a MyFico reality check first. Thanks for the help.
If you have a house, why not look at a HELOC or similar instead? Why give up the title to the house when you own it outright?
@Revelate wrote:If you have a house, why not look at a HELOC or similar instead? Why give up the title to the house when you own it outright?
HELOC is the way to go if you can get one. Chase does small loans, not many lenders do loans under $50k. The other alternative is your local neighborhood or regional bank. They normally have a portfolio product for cases like this one.
I'll have to do more research on a HELOC. I know in general how they work but have no personal experience with them.
I guess that would allow me to draw money to do big renovations over time, but I was thinking mortgage because that would let me do all the work at once then make small payments over 15 to 20 or even more years, and because mortgages have very low interest rates compared with the other types of loans or LOCs I know of.
I don't know much about repayment terms or interest rates on HELOCs, but I'll definitely check into that. Thank you both.
Sounds like a home equity loan would be what you're looking for, it's a fixed loan over a certain amt of years and you get it all upfront.
@cclee wrote:Sounds like a home equity loan would be what you're looking for, it's a fixed loan over a certain amt of years and you get it all upfront.
Yes, HELOC means Home Equity Line of Credit. It is a mortgage. You can drawn down the entire principal to remodel and repay it over time or you can take draws as required and repay. For your needs it would really work. If you can't get one, then a traditional mortgage works.
@StartingOver10 wrote:
@cclee wrote:Sounds like a home equity loan would be what you're looking for, it's a fixed loan over a certain amt of years and you get it all upfront.
Yes, HELOC means Home Equity Line of Credit. It is a mortgage. You can drawn down the entire principal to remodel and repay it over time or you can take draws as required and repay. For your needs it would really work. If you can't get one, then a traditional mortgage works.
I was referring to a home equity loan, not a line of credit, they are both equity loans but the line of credit has an adjustable rate.
I did some research into HELOCs after getting those first recommendations. I was mainly concerned about how long I'd have to pay, and it does seem as if they do allow enough time. However I also found as cclee says that all HELOCs are ARMs and I don't want to get into that potential mess. Short term adjustible rates like credit cards, okay, but I wouldn't want to be trapped into an ARM for 20 years.
I'll look into a home equity loan. Good suggestion.
One thing, though. Everything were talking about seems likely to have high upfront costs -- appraisals, points, etc. Given that, is it it even realistic to be getting any type of home loan for $20-$25,000? Does anybody know what upfront costs might be?
When I was a banker, we had a product for this under our home improvement portfolio. We used the tax assessment instead of an appraisal, no points, the only cost being the recording fees and a title search (we didn't do title insurance, just a search to make sure of our priority) we did it in first position, second position or even third position provided there was equity. The only fee was a small insurance premium.
What you need to do is visit a small local bank, a well established local credit union and a "big box" style bank and present your scenario. Take bids and see which product works best for you.