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Message
Refinancing/Renovation Costs
Posted on 9/10/24 at 10:12 pm
Posted on 9/10/24 at 10:12 pm
Hey what’s up MB. My dad is a POS who knows nothing about money so I’ve come to those who know it best.
Our family is outgrowing our home and we are trying to figure out our best course of action. We love where we live - the location, proximity to schools, neighborhood and neighbors, everything. So one of the options we are considering is adding a second story and renovating our home. The way we would finance this is adding the cost of renovation (260k) to our existing mortgage (265k) along with closing costs (13k) and refinance that into a new mortgage.
Our current mortgage is sub-3% so it sucks losing that. But anywhere else we would like to move and also give us significantly more space would cost more than the reno. So that’s why I’m considering this option.
My primary question for the board is do these closing costs/prepaids seem high to you? They seem high to me, but I’m not sure as I’ve never done a refinance before. I’ve included a picture for reference.
Any other advice is welcomed, as always.
Thanks MB.
Our family is outgrowing our home and we are trying to figure out our best course of action. We love where we live - the location, proximity to schools, neighborhood and neighbors, everything. So one of the options we are considering is adding a second story and renovating our home. The way we would finance this is adding the cost of renovation (260k) to our existing mortgage (265k) along with closing costs (13k) and refinance that into a new mortgage.
Our current mortgage is sub-3% so it sucks losing that. But anywhere else we would like to move and also give us significantly more space would cost more than the reno. So that’s why I’m considering this option.
My primary question for the board is do these closing costs/prepaids seem high to you? They seem high to me, but I’m not sure as I’ve never done a refinance before. I’ve included a picture for reference.
Any other advice is welcomed, as always.
Thanks MB.
This post was edited on 9/10/24 at 10:17 pm
9
Posted on 9/10/24 at 10:18 pm to kung fu kenny
I’d pay more before adding a second story. That’s going to be a big project while living there.
How much equity do you have in your current home? If you sell and move you have the cost of selling the house which will be more than the 13k closing.
How much equity do you have in your current home? If you sell and move you have the cost of selling the house which will be more than the 13k closing.
Posted on 9/10/24 at 10:33 pm to Rize
Well the good news is we stay in the house while they complete the second story, surprisingly.
On the other hand, we are welcoming another child in April so I would really like to get this started sooner rather than later. That’s really the main reason we are looking to do this now instead of wait.
That’s a great point about the cost of selling. Didn’t think of that.
It’s our first home so we didn’t put much down when we bought in 2021. We’re at about 40k equity based on the original loan but if you were to re-appraise we’d probably be at 80k. So not a ton. It’s only a 3/1 so our value is kind of limited by that single bathroom.
On the other hand, we are welcoming another child in April so I would really like to get this started sooner rather than later. That’s really the main reason we are looking to do this now instead of wait.
That’s a great point about the cost of selling. Didn’t think of that.
It’s our first home so we didn’t put much down when we bought in 2021. We’re at about 40k equity based on the original loan but if you were to re-appraise we’d probably be at 80k. So not a ton. It’s only a 3/1 so our value is kind of limited by that single bathroom.
This post was edited on 9/10/24 at 10:35 pm
Posted on 9/10/24 at 10:51 pm to kung fu kenny
Shoot me an email at lsu817@gmail.com
Posted on 9/10/24 at 11:07 pm to kung fu kenny
quote:
Well the good news is we stay in the house while they complete the second story, surprisingly. On the other hand, we are welcoming another child in April so I would really like to get this started sooner rather than later. That’s really the main reason we are looking to do this now instead of wait. That’s a great point about the cost of selling. Didn’t think of that. It’s our first home so we didn’t put much down when we bought in 2021. We’re at about 40k equity based on the original loan but if you were to re-appraise we’d probably be at 80k. So not a ton. It’s only a 3/1 so our value is kind of limited by that single bathroom.
I’d look at buying a newer house that fits your needs in the area you want 1st. Then I’d see what the cost difference is and go from there. I’m currently looking at houses and I’d much rather deal with a remodel vs adding a second story and potential remodel.
Posted on 9/11/24 at 9:11 am to kung fu kenny
Does adding a $260k second story add $260k in value to the home? Generally, this is not the case. You'll throw $260k at the home and gain $100-150 in value.
I'm not sure what the line about your dad being a POS serves here but tell that deadbeat thanks for nothing.
I'm not sure what the line about your dad being a POS serves here but tell that deadbeat thanks for nothing.
Posted on 9/11/24 at 10:08 am to kung fu kenny
How big is the current house? Number of bedrooms and baths?
The problem with the modern family is they think they need more room than they actually do. Kids growing up in close quarters, sharing rooms, doing chores, and learning how to not irritate others grow into better adults.
The problem with the modern family is they think they need more room than they actually do. Kids growing up in close quarters, sharing rooms, doing chores, and learning how to not irritate others grow into better adults.
Posted on 9/11/24 at 10:41 am to ChEgrad
1400 sq ft
3/1
Need another bathroom and would like another bedroom so that family can come visit. We don’t have family close by.
3/1
Need another bathroom and would like another bedroom so that family can come visit. We don’t have family close by.
Posted on 9/11/24 at 10:44 am to WhiskeyThrottle
Yes it would add more than 260. I have done my research. It would take our value from about 330 to 650 if not more. A home down the street just sold for 750 and is the same sq footage ours would be after adding a second story.
Posted on 9/11/24 at 10:44 am to kung fu kenny
I would just buy a new house. In-home construction is a colossal PITA, especially when you are living there with kids. Rates will fall at some point and you can refinance (although probably not at the sub-3 you are at now).
Posted on 9/11/24 at 12:33 pm to kung fu kenny
Insurance seems mighty low…. Not sure where you are though.
Posted on 9/11/24 at 11:50 pm to kung fu kenny
quote:
1400 sq ft 3/1 Need another bathroom and would like another bedroom so that family can come visit. We don’t have family close by.
I’ll admit you do need one more bathroom at the very least.
My wife would like enough room for the kids and their (future) families to stay here when they come to visit. Would be cheaper to just pay for hotel rooms every time they come than adding on to the house.
Posted on 9/12/24 at 11:05 am to npt817
Sent you an email sir
Posted on 9/17/24 at 2:39 pm to kung fu kenny
Just wanted to bump this and ask if anyone had thoughts on the closing costs and prepaids. I don’t know much about this process as I’ve never refinanced but a lot of it seems unnecessary to me, so I’m just wondering if anyone else with actual experience can tell me what’s legit and what’s BS.
Thanks.
Thanks.
Posted on 9/18/24 at 10:18 am to kung fu kenny
quote:
Just wanted to bump this and ask if anyone had thoughts on the closing costs and prepaids.
What bank gave you that? I'd look up some rates online for local banks and then go in and talk to a human about your situation briefly, and if you like them and they are willing to help then continue the conversation.
This is not going to be an easy process, there's likely some money to be saved. There maybe other mortgage options, such as a construction loan. These are things a good local banker/mortgage officer can help you with.
I would absolutely attempt to get multiple quotes/ options here personally.
Posted on 9/18/24 at 11:23 am to kung fu kenny
I refinanced about 4 years ago, and the amount you are paying for closing costs appear in line. What is causing the number to be so high is you are paying $5,400 for a 1% point to get that 5.99% rate. Remove that amount, and you would obviously be paying 6.99%, but your closing costs would be $4,700.
Have you looked into getting a renovation loan, that would become a HELOC for the reno? This would help in 3 main ways. First, you would get to keep your sub-3% on the first $265k. Second, you would only pay interest on the funds as you take them out. So instead of paying interest on the full $260k on day 1, you may be able to start paying a note on the $65k (assuming 25% down to start). Then when it's time for the next draw, you have already started making payments to reduce the first $65k, so now you are paying interest on $130k less your payments... Finally, if you go over/under you budget; you can adjust the final total easier than possibly having to find more money.
Then once everything is done, you can look into a full refinance to consolidate them, or keep it at 2 separate payments.
Have you looked into getting a renovation loan, that would become a HELOC for the reno? This would help in 3 main ways. First, you would get to keep your sub-3% on the first $265k. Second, you would only pay interest on the funds as you take them out. So instead of paying interest on the full $260k on day 1, you may be able to start paying a note on the $65k (assuming 25% down to start). Then when it's time for the next draw, you have already started making payments to reduce the first $65k, so now you are paying interest on $130k less your payments... Finally, if you go over/under you budget; you can adjust the final total easier than possibly having to find more money.
Then once everything is done, you can look into a full refinance to consolidate them, or keep it at 2 separate payments.
Posted on 9/18/24 at 12:41 pm to Weekend Warrior79
Do you know of any banks/lenders that offer this? I have not had much luck finding products other than a construction loan which requires refinancing, or “home improvement” loans which are basically just personal loans and are limited to like 50k and have a staggering rate.
Posted on 9/18/24 at 6:43 pm to kung fu kenny
Keep your existing mortgage and do a Home equity loan for $260k. You will have two separate loans but obviously keep your 3%. And don’t pay points.
Posted on 9/19/24 at 7:04 am to Bermuda99
Don’t have 260k equity otherwise that would be a no brainer. Have about 70-80k equity
This post was edited on 9/19/24 at 7:05 am
Posted on 9/19/24 at 7:09 am to kung fu kenny
Oh, I missed that part. You can’t do a refinance for more than your property is currently worth, so that option is also off the table.
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