We’re looking to refinance our house…the difference between current rates and our rate justify the closing costs.
We also need to replace our garage. (ballpark 10K for purposes of this question).
We are talking to several lenders about options, but I’d also like advice from disinterested folks. How do I determine the best monetary vehicle to use to accomplish the goals? So far I’ve heard of doing a refinance of the house, and then doing a separate home equity loan for the garage. Somebody else mentions having the garage built, then having an appraisal for the refinance on the house to get “cash-out” to pay for the garage (I guess assuming that the garage builders would wait for that).
Anybody have good web sites to visit to bone up on this…or general advice about the best way to accomplish the goals of a house refinance and garage loan?
(Don’t know if this belongs in GQ or IMHO…please move if necessary)
If the garage is in obvious very bad shape, then it will affect the appraisal value. Appraisers usually do a quick look for refinance purposes and rely on the value and sales of neighboring properties.
If you can get a favorable appraisal that will enable you to pull enough extra cash out of the refinance deal to fix the garage and what ever else you may need, then that is one easy option. It would also be good to try to keep the loan to value ratio below 80% in order to avoid mortgage insurance payments.
Remember that increasing the loan value may increase the closing costs and the cash to fix the house is going to be wrapped in to the mortgage. If you were to finance the repairs through a separate home equity loan (another option), you may choose a shorter period and not incur the expense of the interest and extra closing costs for what typically is the longer finance period of the home mortgage.
Depending on the home equity you may wish to consider attempting to eliminate all the debt you may have with a loan that offers a tax deduction for the interest paid.
Remember that a first mortgage with less than 20% equity will often result in PMI payments. You could go the VA route and do 101.5% financing, though – but that extra 1.5% is lost VA funding fee.
If you can get a great home equity rate, you’re probably better off going that route for anything over 80% of your first mortgage.
Aslo, are you absolutely sure that your garage must be replaced? It sounds like it’s detached – a little structural reinforcement and some nice siding will go a long way in a building that’s not habitated, assuming, well, that you don’t want to live in it. 