【Question】I understand that we need to remodel our house somewhat in order for us to sell the house because we have lived here for a little over 10 years and some parts of the house are outdated. We know if we price it low enough, we can sell it as is. However, we would like to not throw our house away. In order for us to get the house ready for sale for the price we are aiming for, can I finance remodeling cost so it will come out of the sales proceeds instead of paying upfront fees? Would a “construction loan” apply in this situation?
【Answer】Thank you for your question. This is a good question to ask a lender. So we passed this onto Brian Hitchcock, Senior Loan Officer, from the First Bexley Bank. Here is his answer:
Great question. The easy answer is “no”, of the several types of construction loans available, none are cost effective or timely enough to be used in this manner and most would not be too happy to be paid off so quickly afterward.
The exception would be the Home Equity Line Of Credit (HELOC). I like using HELOC’s two ways:
1) Keep existing financing in place and add HELOC to it to pull out money for repairs on existing home and/or down-payment on new home. The owner needs to have some equity and decent credit, and they need to qualify with both homes if they plan to buy before selling, but this is a good way to fix up existing home before listing.
2) Pay off existing first mortgage and free up additional funds. This HELOC is typically larger but serves two purposes. It can lower overall debt ratios (especially when converting a shorter term loan) as well as significantly lower the seller’s monthly payment while they wait to sell, allowing them to save up additional down-payment funds.
HELOC’s are cheap, easy and fast. Most of the time costing the borrower little to nothing and closing within 2-3 weeks. The only downside is that they often have pre-payment penalty of $250 but this can sometimes be waived if the line transfers to their new home.
If you would like to speak directly with Brian, here is his information.
Senior Loan Officer
First Bexley Bank
FBB Mortgage Loan Group: 2641 Oakstone Drive, Columbus, Ohio 43231
LO NMLS ID: 462132
Company NMLS ID: 412724