Financing for an earth-banked home

savedbythereviewsNovember 16, 2013

We are going to build an earth-banked home. We have a great floorplan, and a company that will supply materials our contractor will use to build it. It is a one level, 4 bedroom design, built so we, both in our 60s, can age in place. 42" doorways, 4 ft hallways, handicapped accessible bathrooms - showers, toilets, vanity. 4000 sq ft, all at grade.

And that, is the problem. In Kentucky, where we own the land we'll build on, an at-grade, one level, earth-banked home is appraised as a "basement" home. Being earth-banked makes the home, in the minds of our bank's appraiser, a basement. Fourteen foot ceilings throughout, custom finishing on the interior, custom windows facing the southwest all along the front of the home, a 3 car attached garage, built with materials that will last 100 years, and it's a basement.

The only lender willing to talk to us appraised this a basement. We have been looking for 3years for a lender, in Kentucky, to help us finance the build. Now, we have had success with national banks being willing to finance this as the green roof technology it is, but our builder, being a local man with impecable recommendations and references, refuses to share his financial information with them. A lot of business in Kentucky is done on a hand shake, and being asked to submit his last three years of tax returns was an insult and he refused. So, we're back to local banks.

We are VERY discouraged and wonder if we'll ever see our dream come true. Any thoughts? And do not say get another builder. We have the best builder in the area, who spent a great deal of time researching the ins and outs of our build before he consented to take us on. He has lined up sub-contractors, and has been ready to build it for three years. And, short of selling everything...everything, including our clothes, to finance the build with cash, we are very discouraged. Yes, we've even considered selling the land and moving our dream elsewhere, but KY's taxes on retirement income are almost the lowest in the country. The land is beautiful, the people welcoming and friendly, and we would rather stay there....well, get there.

So. Thoughts? Suggestions? Money to lend? :)

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If you have equity in your current home - you can probably mortgage that for the construction . Its actually a lot easier to do that then go through a construction loan process anyway .

    Bookmark   November 16, 2013 at 8:25PM
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Sophie Wheeler

You don't want to hear about the many many red flags that I see in the scenario of someone who won't share his financials with a bank and someone who wants to build something so outside the local norms but doesn't have the economic freedom to easily do the project. The builder shares his financial records with the IRS (or maybe he doesn't, hmmm), so I don't get the big deal on his part about the expected business norms of the world. And, the local banks are correct. For your location, you're building a basement home. It might as well be a Mayan pyramid or a Martian jabberwocky to them. It's not the norm. You're not in CA. You're in KY. If you want to stay there, you need to modify your existence to what is considered the norm in KY. Or come up with all cash for the build, as well as a 30% contingency fund because of it's unusual design and the builder's scary financials.

A dream is a good thing to have. A dream ungrounded in any form of reality to make it happen is fantasy. After 3 years, you'd have thought you would have figured out which category this house was in.

    Bookmark   November 17, 2013 at 9:32AM
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While this is not what you want to hear, I agree with hollysprings. If you are in your 60s, you likely have less than 5 years of earned income left. You should be planning to have your home paid for by retirement age. That is "partly" why they calculate 70% of your current income to figure your retirement income needed. Even if you are not paying cash for your whole build, you should be in the range to cover a good 50% or so, which I would figure would get you to the value that an appraisal would put on the home anyway. Your home would be very hard to sell as it is not what people are looking for. Therefore, you should be taking on a larger portion of the risk. Regardless of your builder not sharing his financials, an appraisal would still need done...and it is going to have a lower value because it is harder to sell. An appraisal is just much will your house sell for in a a reasonable timeframe, not how much it costs to build.
Aside from these things, do you really need 4000 square feet? I imagine I would need a lot less home when I am near retirement age than while I am raising 3 small children. My parents have 3 guest bedrooms. The room I stay in is larger than my master bedroom. All 3 of these rooms have larger closets than any in my current home. My mom likes a perfectly clean home and this house is too big for them to clean. If you want something unusual with the highest grade of finishes, then build a smaller footprint, and bring more cash to the table. Good luck!

    Bookmark   November 17, 2013 at 12:24PM
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I'm not sure I completely understand the concept. What I'm picturing is 3 sides built into the side of a hill and one side at grade. If I have it pictured correctly, is it possible to just have one side into the hill and fill in sometime down the road?

I congratulate you for thinking about the future in your design. Would think this home will be energy efficient, too.

Have you talked to your homeowner's insurance company, if local? Maybe they would have suggestions. If you are in a tornado prone area, they might know of ways to get a home built that is less vulnerable in a storm.

We are building an unusual home for our area and are just a bit younger than you. I'm sure people will scratch their heads at some of the things we will have. We've tried the condo route twice in recent years. That's what many in our area do as they approach retirement. You have to think about cash flow. A lot of yard work and maintenance can be had for what we pay in condo fees.

We're building a large house with low maintenance features. You know what you want and I bet you're going into it with research on your decisions.

Good luck - and keep us posted.

    Bookmark   November 17, 2013 at 1:52PM
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You should be planning to have your home paid for by retirement age.


    Bookmark   November 17, 2013 at 6:18PM
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