The past has afforded few alternatives for funding your home addition projects. The first being a loan to build a home addition using the equity you have built up in your home. The best thing about using a home equity loan for the addition is that it will usually be tax deductible.
You also had the choice of paying for the home addition in cash, or a cash-out based on the market value of your home. Now, there is the possibility of obtaining a loan for a home addition. These loans are based on the completed value of the loan project and not the value of the home before the addition has been built.
Actually one loan for a home addition is a construction loan to purchase property and the money is disbursed at intervals during the construction process, this is the closing. When the project is finished, it is determined which loan structure you will be using without further closing costs. This is the one time cost, single rate, one step, loan for home addition construction.
The intervals at which funds can be drawn on the above loan are as follows:
1st draw: This is 15% of the loan and is used to purchase property or put down a foundation or a slab and any outstanding mortgage is paid off at this stage. Any monies needed for permits, or any work at the site are paid at this time.
2nd draw: 10% of the loan amount and is used for rough framing of the job. Unfinished floors and walls.
3rd draw: Accounts for 20% of the loan and includes, roof framing, rough plumbing, and pretty much any other items.
4th draw: Includes exterior and interior finish, and 20% of the loan.
5th draw: 20% and includes any cabinets and trims and final work.
6th draw: Last draw for the loan for addition Makes up 15% of the loan and is the final draw on the loan and includes any final inspection fees and permits and any clean up and last construction.
Another loan for home additions is a two-step program, which allows one to borrow up to 95% of the total cost of the home. Interest is paid only on the monies used. Both of these programs allow the homeowner to do the work themselves as long as the construction costs are less than $50,000 and the project will not include modifications to the foundation. Otherwise this particular loan will require a contractor at a fixed contract price.
To be sure you are getting the loan for your home addition project that suits your situation best, you will need to see a loan specialist at the financial situation of your choosing. A loan specialist can help you through this process.
