Short $30k at end of Foundation / Remodel Project

speede235July 13, 2009

We're close to wrapping up a massive build-out / remodel / foundation project and are out of loan money, trying to figure out our options.

We've got two mortgages out. We borrowed less than we wanted, mainly because we were signing our loan docs in the fall of '07, right when all the lending was tightening up. We re-negotiated with our two contractors to adjust for the decreased amount of cash we would have on hand.

But then the roof completely failed during foundation leveling. And we found some more dry rot. And the city wanted fire sprinklers. And the utility wanted $10k for a gas line.

Talking to both of our lenders, they want us in the house before they'll consider refinancing -- their definition of remodel vs. reconstruction is whether or not the house is occupied.

Anyhow, a couple of key items need to be wrapped up before we can occupy, including exterior railings, stucco, fire sprinkler, gas, and drywall. We were planning all along to take occupancy after that point, finishing the interior, exterior & landscaping ourselves.

With the banks saying "no more dinero," and us needing to spend ~$30k to move in, we have a few options:

- tap down-on-the-market retirement and already depleted savings accounts, which we would rather keep in tact as a emergency reserves

- run up the credit cards and work to pay them off (or roll in to a new mortgage)

- borrow from (???) as an unsecured loan (fine, but from whom?)

Anybody else in a similar situation in this down economy with advice?

Just to be clear, financially we're not up against a wall or in over our heads. The existing mortgages are leaving us plenty of money left over for the other work to get done in a pay-as-we-go fashion. And the sooner we can move in, that's another thousand bucks in our pocket monthly. But we need to get this money now so we can get moved in and refinanced.

I'm thinking credit cards are easiest, but I'd hate for two maxxed-out Visa accounts to affect our credit score when refiancing the home.

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haus_proud

Seems like you're between a rock and a hard place. I feel for you. If you have $30K in a taxable account in a cash equivalent fund of some kind, I would use that. But I would not cash in a depleted stock holding because that would turn a paper loss into a real loss. And I would not use money from a tax deferred account especially this year when you can refrain from taking Required Minimum Distributions, which are taxable, a "gift" from the IRS due to the market collapse.

Aside from these suggestions, Is there some way of getting a certificate of occupancy (that would satisfy your bank) if only part of the building is so certifiable? Probably not, but maybe worth exploring any way.

    Bookmark   July 13, 2009 at 11:18AM
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ian_bc_north

Do you have family you can hit on for a short term loan until you can move in?
I should know, I have been on the receiving end of such requests.

    Bookmark   July 13, 2009 at 12:22PM
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devorah

You have cash but you don't want to use it because it is for emergencies? Doesn't this qualify as an emergency?

    Bookmark   July 13, 2009 at 12:58PM
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cindyb_va

Do you have a 401k that you can take a loan out against (versus an out and out withdrawal)?

I agree with devorah, this is one of those circumstances that counts as a rainy day and you should consider pulling cash reserves to cover.

    Bookmark   July 13, 2009 at 1:40PM
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speede235

Thanks all... some replies:

- Hitting up family isn't much of an option. This had been my in-laws' house that they were unable to maintain due to age, disability and income; the project was to build out a ground floor "apartment" combined with foundation work. They're in it with us, and have no financial resources to fall back on. And unfortunately, MY dad recently joined the ranks of the unemployed, so I don't want to impose (he's been a great help to me working on the house, and they've graciously contributed financially prior to his job loss).

- I don't want to count this an a rainy day emergency just yet -- we're doing fine living in a rental and we do have the option of ceasing all work and taking a break for a year (or whatever it takes) while we regroup. I'd rather have any savings banked for other financial hiccups, like job loss or true emergencies.

Do any of you have experience with unsecured loans from credit unions, other lending institutions, or even going to credit card companies? Just curious if these are options. Actually planning on hitting the street today to visit my two CU's, and thinking a call to my credit card holders might be worth while -- as long as they don't get scared off by my request and pull our credit!

    Bookmark   July 14, 2009 at 11:58AM
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speede235

We visited Wells Fargo Financial and here's what they offered to loan us:

145% of our value of our cars (we had to show them pink slips, so if we were financing, we would be SOL.

$6,000 unsecured with the potential to ask for an increase. This is basically a credit card with a 15% rate.

Added up, that amounts to $41,000. We're going to shop around a little. This would at least be a step towards getting us in the house and allowing us to refi, though Wells told us they're freezing all refi requests until October due to the number of existing requests in the pipeline.

    Bookmark   July 15, 2009 at 10:55AM
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