Construction loan to mortgage

[Anonymous]

We have completed building of a new home and are currently paying 5% interest rate on the construction loan. We also have a home on the market. Our Real Estate agent suggested we borrow or get a equity loan against our home that is for sale and paying whatever amount we planned to pay off on the construction loan and move it to a regular mortgage. My banker where I have the construction loan is telling me that would be a dumb move. I feel like I am flushing 2k a month down the toilet in Interest on the construction loan though. I know that I would have an extra closing cost to take out an equity loan on my old house, but if I wait for my Home to sell am I just throwing my money away on the construction loan? Any advice appreciated as I’m losing sleep over this.

[Anonymous]

I'm not an expert by any means, but I'm pretty sure that most banks will not allow you to get a HELOC, Home Equity Loan, or refinance a house that is currently on the market. If the house is under contract and has a lot of equity in it then you could get an unsecured bridge loan. But once it's on the market a bank has no incentive to give you a HELOC or Home Equity loan. The loan would be too short-term for the bank to profit from interest payments.

[Anonymous]

Makes sense, thank you. Would a Bridge Loan be an option or a better idea? As a note, I don’t owe anything on the home I have listed, but I’m starting to wonder if it is going to take a few months to sell.

[Anonymous]

I think a bridge loan is only an option if your old home is currently under contract to be purchased. The purpose of this type of loan is to allow you to leverage the equity in your old home as a down payment on your new home. This effectively bridges the gap between the time it takes you to sell the old home and buy a new one. I also think that in order to get a HELOC or Home Equity, your home would have had to be off the market for 6 months prior. So removing it from the market and trying to get a loan is probably not a viable option either (in case you were thinking of doing so). Again, I'm not an expert so maybe someone else can chime in if I may have overlooked or misstated something.

I wish I had more substantive advice to offer on helping your situation. 

[VALoanMaster]

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@Anonymous wrote:
We have completed building of a new home and are currently paying 5% interest rate on the construction loan. We also have a home on the market. Our Real Estate agent suggested we borrow or get a equity loan against our home that is for sale and paying whatever amount we planned to pay off on the construction loan and move it to a regular mortgage. My banker where I have the construction loan is telling me that would be a dumb move. I feel like I am flushing 2k a month down the toilet in Interest on the construction loan though. I know that I would have an extra closing cost to take out an equity loan on my old house, but if I wait for my Home to sell am I just throwing my money away on the construction loan? Any advice appreciated as I’m losing sleep over this.

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Why not just refinance the exitsing construction loan into a permanent mortgage?