When looking at a remodeling project that’s going to require some financing to complete, there are a number of ways to approach remodeling construction loans.
In fact, many times the source of capital may not even be a formalized form of construction financing by definition, depending on the repayment plans of the borrower or builder.
For instance, if the intent of the borrower is to complete the project and repay the balance in a number of months, then a personal line of credit or even credit cards may very well be able to do the job.
If a larger amount is required than your available credit will allow, then you might want to get a home equity line of credit against the existing value of your house. Home equity lines can be provided through banks and other institutional lenders for as high as 80% of the value of the property.
If the repayment period is expected to be longer and you don’t want to manage the interest rate risk on a large line of credit balance, then a second mortgage on the property could be a good option as well.
The proceeds from the second mortgage could be used to fund the construction project by itself, provided there was enough equity in the property already to secure a second mortgage for the construction costs without factoring the increase in property value that may be potentially created by the completed renovation.
If there isn’t sufficient equity in the the property to finance the renovation under the requirements of a bank or institutional lender, then another option would be to utilize a private mortgage lender to provide a second mortgage to fund construction.
At the end of the construction period, the property could then be reassessed, and the private mortgage could then be paid out by either refinancing the existing first mortgage or getting an institutional second mortgage, based on the increased property value.
As you can see, there are a number of types of remodeling and renovation construction loans with some being more obvious than others.
The key is to utilize a construction loan source that will best fit your needs for the lowest potential cost. In order to accomplish this, I recommend you give me a call so I can go over your requirements with you and point out which remodeling construction loans would best fit your needs.