If you have been thinking of starting a project on your home, now is a great time to do it. Interest rates are some of the lowest we have ever seen, but what does this mean for you? We jumped on a call with the Vice President of HomeTrust Bank, David Novak, to get the down-low on types of loans, how they work, and more.
“Interest rates are favorable and in the big scheme of things, they have been for some time. There is no reason that people should not move forward on a project. Money is available for the kind of project that you envision.” – David Novak
There are really three types of loans that you should look at when you are considering doing a construction project on your home.
- Home Equity Loan: To put it simply, if you have equity, you can get a home equity loan. A home equity loan is a type of second mortgage. Your first mortgage is the one you used to purchase the property. A home equity loan allows you to borrow against your home’s value minus the amount of any outstanding mortgages on the property. With this type of loan, you are using your home as collateral. This is good for small-to-medium projects.
- Cashout Refinance: If you have owned your home for an extended period of time, you may have an interest rate above 4% and you could do a cashout refinance. What this means, is you will refinance your home and walk away with a money cashout. You can then use that money to pay for the renovation. This is great for smaller projects.
- Construction-to-Permanent Loan: If you are doing a large-scale addition, this is probably what you are going to want to go with. This loan combines two loans into a single one. The money for you to build or add-on to your home is advanced in stages to the contractors. Once the home is complete and you move in, it converts into a permanent mortgage loan. This loan uses the future value of your home after the improvements are made. You can also use this loan if you find a home that you would like to buy but it needs a lot of work done to it before you want to move in. You could buy the house and finance the build when you buy it. For example, you buy a house for $300,000 with a $600,000 loan.
“The biggest thing to remember is, do not run out of money. Always make sure you have more than enough money upfront, becuase you can always pay it down. If you get halfway through building the home and you need more money, it has to come out of your pocket. Once the loan closes, you cannot borrow more money. The loan is closed.” – David Novak
Put Together a Strong Building Team
When you are deciding who you are going to work with, you need to find a good builder as well as a good loan officer. You are going to be working with this team of people for a very long time! We are a leader in providing value-added construction services. We will create a successful partnership with you and work closely with you throughout the construction process. Our pledge is to establish lasting relationships with our customers by exceeding their expectations and gaining their trust through exceptional performance by every member of our team. Contact us today to get started.
If you are looking for an amazing loan officer, David Novak, and the HomeTrust Bank team are one-of-a-kind. HomeTrust Bank has years of experience and they specialize in the loans we have discussed above. Learn more at HTB.com and contact David directly by email or by calling 919-632-8443.