Refinancing house during/after remodel

[2rocky]

We recently purchased our home and have approximately 1/2 of the appraised value mortgaged.

we made an agreement with a family member to finance an addition and remodel for interest only, which we planned to pay off when we refinanced the home post renovation.

Well we are at the limit of that agreement amount, and we are still in the process of doing the remodel. yeah went WAY over budget.

I know the bank doesn't want to loan on an "unfinished project"

What are my financial lending options to get me to the point where I want an appraiser looking at the place?

I have some stock I could sell...

 

[Dinkshooter]

"Accidental" fire?

 

[2rocky]

Dink I appreciate your attempt at levity.

Looking for some input from folks who have been through this.

 

[npaden]

A lot of places (credit unions, banks, etc.) will do home equity loans for remodels, etc.

With only having 50% of the house mortgaged I think you would be able to do one of those real easy. You'll probably have to pay it off when you refinance the house, but sounds like you plan to do that anyway.

 

[1_pointer]

Can you borrow against your 401K/retirement account? I have that option up to a certain amount as long as it's for a primary residence. I normally wouldn't consider that too much, but is sounds like your looking for more of a 'float' until you refinance.

As an aside, I'd much rather borrow from a bank/business vs. family or friends. Too easy to get hurt feelers.

 

[jryoung]

I'm currently rebuilding and due to the timing of insurance money being released we are floating our work as well. I know we can refinance at the end, but my interim option will be to borrow against my 401(k) for simplicity. It's easy, no credit BS, and a favorable 4.25% while we have the loan out.

 

[npaden]

I'm not a big fan of borrowing against your 401K. I know too many people who have had a loan out from their 401K at a low interest rate at the same time the market significantly outperformed.

I would not be happy with a 4.25% return on my 401K, even if it was guaranteed. Sure, there are times when it won't perform that well and there are times when it might even have a negative return, but my average annual return on my 401k for the last 23 years is almost 3 times that 4.25%.

I would rather take out a loan with the bank and let them make the 4.25% interest will I keep my money aggressively invested in equities and hopefully do much better than that.

I'm probably not normal though.

 

[LopeHunter]

My 401K has returned over around 10.2% annually with dividends reinvested for the past 23 years. I typically am 90% or more invested in S&P 500. My current 401K will show "increase in value this period" which is a useless number when trying to judge performance since included contributions this period.

If my memory is accurate, the 401K has one key pitfall if take a loan...is immediately due for repayment if you leave your job for any reason.

I would suggest Plan A as a home equity loan to complete the project then refi the home. Plan B would be the 401K.

 

[track1]

Whatever you decide to do make sure you get a few thousand extra dollars for a little hunting trip and a taxidermy bill.

 

[PatrickK]

Do the work yourself. I built my entire house on weekends and holidays and managed to do it without any home loans.

Patrick

 

[theRedneck]

You could try a home equity line of credit to finish off the remodel.

 

[ShootsManyBullets]

Since your family loan is unrecorded you should be able to take out an equity line of credit to finish the work and/or pay off your family member. They may give you enough to pay off your family member and finish the work.
After it's complete you could refi it off and pay off the line of credit with the refi. A couple of the tax professionals here may also remind you that there is a tax benefit for using the line of credit through the bank in addition to adding to your cost basis in the home if you sell down the road sometime...

 

[sagebrush]

Been a few years since I was in the mortgage business, but I doubt much has changed. It will be pretty hard to get an equity line of credit on a property in the throes of a remodel. 401k loan would be the best short term financing to complete your project.