Financing a rebuild (Austin: insurance, mortgage, refinance)

[mowilly]

Does anyone have any experience/advice on acquiring financing to rebuild a house while you still currently have a mortgage on the existing home? Is it even possible? Mortgage balance is about $100k less than the value of just the land.

[centralaustinite]

Originally Posted by mowilly

Does anyone have any experience/advice on acquiring financing to rebuild a house while you still currently have a mortgage on the existing home? Is it even possible? Mortgage balance is about $100k less than the value of just the land.

Rebuild? Has the home been damaged or destroyed in some way? Or do you mean a remodel? Can you be more specific about what you want to do? Are you currently living in the house? Is it your homestead?

It sounds like you have equity, you could possibly refinance the mortgage and take cash out, or apply for a home equity line of credit.

[mowilly]

I want to build a new house where the current house stands. It is my primary residence/homestead. Remodeling would be great, but it has foundation and drainage issues. Not like annoying-muddy-lawn drainage issues, more like two-inches-of-water-in-the-front-half-of-the-house drainage issues. If I could elevate the house by one foot it would solve my problems, but it's on a slab so I can't. The nature of the lot gives me no reasonable options for drainage solutions other than going higher up.

[centralaustinite]

Originally Posted by mowilly

I want to build a new house where the current house stands. It is my primary residence/homestead. Remodeling would be great, but it has foundation and drainage issues. Not like annoying-muddy-lawn drainage issues, more like two-inches-of-water-in-the-front-half-of-the-house drainage issues. If I could elevate the house by one foot it would solve my problems, but it's on a slab so I can't. The nature of the lot gives me no reasonable options for drainage solutions other than going higher up.

So you want to demolish the house and then rebuild a new house on the same lot! Is this in the City of Austin? Have you applied for a demolition permit?

This is really out of my depth. I think you need to talk to the bank that holds the current mortgage as you are proposing demolition the asset that secures the loan. What does your insurance company say?

If it is possible to legally demolish the house, I would guess that you could possibly get construction financing secured by the value of the land but it might be complicated. Almost certainly you would have to pay off the current mortgage and then you are free to demolish the house and then apply for construction financing.

[eirenecat]

Are you talking about one of the 203K rehab/renovation loans? That might accomplish what you want to do.

[austin-steve]

Originally Posted by mowilly

Does anyone have any experience/advice on acquiring financing to rebuild a house while you still currently have a mortgage on the existing home? Is it even possible? Mortgage balance is about $100k less than the value of just the land.

Get with a builder who works with a bank that does construction one-time close building loans.

The initial draw, essentially the land purchase funds, would pay off your mortgage and cover the demolition. That puts you at a build-ready lot but with elec, sewer, etc, already in place, so no new tap or hookup fees. You will have grading through, and whatever buildup the slab engineer wants to get your elevation.

From there forward it's just a standard custom build with periodic draws.

At completion and certificate of occupancy, the loan converts from a construction loan to a traditional mortgage loan and you're done.

That's my best guess, so you'll need to call around and verify. If you're building an upper end home, call Tilghman Nalle at Nalle Homes and tell him Steve sent you. He'll explain the options.

Note, the solution to your drainage problem may be the beginning of your neighbor's drainage problem. Be cognizant of that and make sure you don't expose yourself to a nightmare and a lawsuit.

Steve