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HEL questions

April 12th, 2010 at 07:51 am

First a bit of good news: on my walk yesterday I found 9 pennies! They were scattered in a trail and I thought I was on candid camera- stooping down to pick up a penny, then spying one a few steps away, stooping down again just to see another a few steps away.

Anyways, on to the tricky business:
BB and I want to borrow $40-50k to renovate the Impulsive Purchase. Our contractor quoted us $40k to complete everything we want…but we are already thinking of some other things as well. So somewhere in that range is what we would like to borrow.

In late July we want to hire an engineer/architect to draw up plans for our remodel.

Construction is not set until the 1st week of September, when BB comes home from the season. He plans to be at the site everyday checking on things, learning, and helping out. As of August 1st- we will have owned the property for 6 months.

I want to get a HEL on the Impulsive Purchase. But we only put down 3.5%. The Impulsive Purchase appraised for $15k over purchase price during the sale process…and BB & I bought it because we believe conservatively it is worth $30k over purchase price as it is now. There is 1 good comp (same bedrooms/slightly better kitchen/worse location) listed at $90k over what we paid on the same street now…but it’s been listed for sale for months and no offers.

So…what is the HEL process? I know we pay for an appraiser to come out. Does the property need to appraise as is for higher than we paid for it and we will be able to borrow 80% of the equity? Or would the appraiser account for the remodeling we have plans drawn up to do?

The other possibility is this (I don’t like this possibility):
We take out a HEL on our existing home. The house that I love and never want to leave. This home had 40% equity when we bought it (because we put 40% down)- but the equity shrunk as the housing market declined…but we still have about $62k in equity in it..I am guessing. So that would be enough for The Impulsive Purchase remodel. But I know that in the event that we cannot pay the HEL off…we are putting my beloved dream home in jeopardy.

So I would much rather borrow against The Impulsive Purchase- if possible. Does anyone think it would be possible? Or would I be wasting money for an appraiser to go out to The Impulsive Purchase? Is there another alternative maybe?

…Interest rates on HEL’s tend to be much lower than mortgage interest rates…right? Does anyone know what range they are in these days?

7 Responses to “HEL questions”

  1. creditcardfree Says:

    No, HEL's are ususally higher than mortgage interest rates, because it is risker to the lender to be second in line in a foreclosure situation.

    I agree, don't put your primary home in jeopardy for Impulsive Purchase.

    Our home equity loan was taken out at the time of our home purchase to avoid PMI. 1st mortgage 80%, 2nd for 10%, so we only had one appraisal. Based on the amount of equity in the Impulsive Purchase, I don't think you would qualify for a HEL. But you can prove me wrong by calling a bank!

  2. gamecock43 Says:

    Am I thinking of a HELOC rate then? Is that smaller than mortgage rates? Can I get one of those? Arnt they basically the same thing except a HELOC is like a credit card and a HEL is a one time only loan?

  3. creditcardfree Says:

    It could be that HELOC rates are lower. I'm not sure. Yes, HELOC is a line of credit that you can take out, pay back and then borrow from over and over again. HEL is one time only.

    You might be able to get one, but I'd advise you to call a bank. A question does not obligate you to a loan!!

  4. gamecock43 Says:

    LOL. I got it. Just wanted to collect background info first- I dont want a bank telling me things I dont understand.

  5. Ima saver Says:

    Be careful using an arch./engineer to draw up your plans. They can cost you a forture. Try to find a draftsman to do the plans.

  6. gamecock43 Says:

    My contractor suggested a guy who did the contractors house...he's $400. Is that a lot?

  7. Ima saver Says:

    WE charge $1 per square foot, so no that is not too much. I am thinking of some of the places around here that charge $12,000 just to do a house plan.

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