value and loans maxed out home not finished

jubileejOctober 27, 2006

Due to major, major overhaul of home,(we had tried unsuccessfully for a year to sell it as a tear-down) our funds are running out and the home value is maxing out. However, we have practically rebuilt it structurally and being able to finish well would boost home value to a new level. Should I take out a construction loan? We will want to be selling within a few years due to becoming empty nesters.

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steve_o

Are you sure that "being able to finish well would boost home value to a new level"? That may have been true even 10-12 months ago. But the housing market is flattening like a pancake. I don't know where you're located, but you may be surprised at how home prices have moderated or even dropped a little . If it's been a while, you may want to have some comps (re)done to see if you'll still get out of the house what you hope to.

Assuming that you have not now lost value on the likely selling price, I would seriously consider what you have left to do and what must be done. Obviously functional issues need to be addressed. But "nice to haves" may wait or may never happen. You don't want to put money into this house unless you can get more than your investment out of it, and putting a short "finish-it-and-sell-it" timeline on it does not help the return on your investment.

One other consideration other than a construction loan: if you're moving to a different house, what about a bridge loan? It might come cheaper; it doesn't sound like you'll need to use the money over several months.

    Bookmark   October 27, 2006 at 8:41AM
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jubileej

Thank you, Steve - sounds like excellent advice!

    Bookmark   November 2, 2006 at 12:17AM
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