construction loan or spend down HELOC?

jubileejNovember 28, 2006

We have refinanced our whole house remodel 3 or 4 times - I lose count, and will need to max out the current one to get our floors in in 4 rooms. Should I consider a construction loan to finish to preserve the remaining home equity for other expenses (such as son's college tuition, car expenses, etc.)?

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Don't construction loans usually come with short terms, with the expectation that you will refinance the mortgage after construction is complete?

    Bookmark   November 28, 2006 at 11:55AM
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I don't think you can get a "construction" loan for a remodeling job. You can get a second mortgage that can be used for Home Improvements.

But true construction loans are usually Interest Only draw loans to build a new house. At the end of construction they are then "modified" into a regular first lien mortgage.

    Bookmark   November 28, 2006 at 1:50PM
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Hi jubileej,

Something simple is missing here;
It doesn't matter WHAT you choose to call the loan... "equity loan" or "construction loan" or "renovation loan" etc. You are ALWAYS borrowing against the remaining equity.

I'd suggest getting a properly structured renovation loan in place. A good loan officer will walk you through the paces, which (in itself) will help gel your working plans & budgets, and FINALLY bring the project to completion for you.

Getting the project done all in one coordinated process will be cheaper and less stressful to you overall, and then you will finally be able to get a standard, long-term financial plan in place.

Dave Donhoff
Strategic Equity & Mortgage Planner

    Bookmark   November 28, 2006 at 10:08PM
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