Existing Equity Loans
These are typically the easiest loans to come by. Our loan may come from a variety of sources including a new first mortgage, a new second mortgage or both. The new mortgages may be a conventional product or a nonconforming product and the second trusts may be a loan or a credit line. All will have loan to value restrictions based on the guidelines allowed by those products. The biggest benefit these products offer is the potential to be the only loan you need for your project.
Future Value Loans
As the heading implies the future value of your completed project will greatly influence the product and loan type available to you as well as how much you can borrow to complete you project. Much like Existing Equity Loans the future value loans have loan to value limits or “caps.” Their advantage relies on the “As Completed Value” of the appraisal that will take into account the overall scope of work and comparable sales of similar size and appeal to your home once the project is done. This will greatly influence the final value and what can be borrowed.
In most cases, the loan type for the Future Value Loans will be of short duration and come with upfront fees and schedules that must be adhered to draw more money out of the loan for the project. While this may add to the cost of the project, it is necessary to protect both the lender and the client from the builder falling behind or misappropriating funds. Because of the short duration of the loan (typically somewhere between 6 and 18 months) and lack of conversion with most of these loan types, a refinance, typically referred to as “take out financing,” must be put in place to remove these loans once the project is completed.
Because of the specialized nature of these loan types and overall scope of the project it is very important to have your project addressed individually.