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Im new here. Been lurking around and decided to sign up. Anyway, my parents own their house. Although my dad has a lein on it because of a small business loan Im not quite sure its considered free and clear. Well unfortunately I have to live and take care of them. I refuse to send them to a assistant retirement home. As I get older (only 25 in college) I need my own space without the idea of totally moving out. I want to add an addition to their house so I could be home and yet have my own space. What can I do about getting a 15k loan to execute this project. I have an idea, design in mind. I gathered my sources for subs now I just need the finances. What are my options?
1) Buy house from parents, pay off lein balance with the check the parents get from the bank and use left over for addition then pay a mortgage? (Dont really want to do that)
2) Apply for personal loan?
3) Refinance or do a reverse mortgage?
Keep in mind I want to pay off the loan in 10 years or less because when I'm done with school I want to buy a new house.
Thanks for any input. I figured this would be the right place to come.
I want to add an addition to their house so I could be home and yet have my own space. What can I do about getting a 15k loan to execute this project. I have an idea, design in mind. I gathered my sources for subs now I just need the finances. What are my options?
Where did you get your $15K number from? What size addition are you contemplating? Home additions carry the potential for detracting from the value of the overall home, if not done right and well.
Since you are a student, could you qualify for any financing?
Since you are 25, your parents are likely in the 50-60 age bracket. They may not even be old enough to qualify for such a mortgage and are likely to live another 30 years.
If your parents own the home w/o a mortgage but have used the equity in it to secure of loan for their business there is almost certainly a lien on the title related to that. Technically you need to find out the details of that, but it is likely that loan is now in "first position" the same way a mortgage would be.
If the loan for the business still leaves some equity then it is probably true that mom and dad could tap into that with a HELOC or a fixed term home equity loan. I assume they have income from the business and decent credit. The proceeds from this loan could be used to build the addition you are considering -- be careful that YOUR PARENTS apply for and recieve the proceeds from the loan, even if you help manage the remodel / adddition by being on joint accounts with them. Mingling money can led to charges of fraud. If the rate on the prior business loan is higher and the amount is small enough that a large home equity loan could retire that debt that might be smart for your parents to do.
You do not want to apply for a personal loan to fix up your parents house -- firstly the rate you pay would be ridiculous, secondly the interest would not be deductible, thirdly you would not benefit from the appreciation to your parents house.
If you work out an agreement with your parents that you pay them rent that is equal to the payments for the renovation portion of the HELOC this would make a lot more sense and be properly documented should you get audited.
You should not buy the home from your parents until / unless you can afford to get a mortgage in your name at a market rate. Further, should their illness deteriorate and they need advanced care that you cannot provide you should be very cautious about any transactions that would make it harder from them to Medicare coverage. May want to consultant with elder care attorney / generational wealth planner.
I would NOT recommend a reverse mortgage in your situaion unless you understand that any need YOUR PARENTS currently have will come out WITH INTEREST when the house is sold -- if you want to eventually own the house a reverse mortgage would hurt you and potentially them to...
It does NOT sould like your parents are good candidats for refinance either, as if they are so ill that you have to take care of them now they probably are not going to be appealing applicants to any lender ESPECIALLY if you want to do a "cash out refi" where the standards have gotten ridiculous of late due to massive fraud.
If you want instead to dump your parents house and plan for only a ten year horizon you have a whole different set of factors to consider, including the advisablity of making any addition when perhaps neither you nor your parents will recoup the investment.
[quote=middle-aged mom;10542250]Where did you get your $15K number from? That is what I have set as a budget. It isnt going to be a glamorus expensive addition. Just basically a roof, siding, lights, slab. It will be done all with inhouse except for the slab pouring.
What size addition are you contemplating? 450 Sqft.
Home additions carry the potential for detracting from the value of the overall home, if not done right and well. I am aware of that. This is what I do for a living. I just dont have the funds all together at the moment. Which is why I am trying to finance.
Since you are a student, could you qualify for any financing? That is what I am trying to figure out.
Since you are 25, your parents are likely in the 50-60 age bracket. Yes
They may not even be old enough to qualify for such a mortgage and are likely to live another 30 years. I'm trying to finance it through me. I have a full time job and in the future the house will eventually be mine anyway.
Thank you for a very much discriptive explaination of each option. However, I figure the house is eventually going to be mine someday so I figured getting a loan for 15k and pay it off in 60-72 months which is mangable because I have a job and the payments are cheaper than moving out. I believe 15k is do able its just the matter of finding it. I dont mind if weather it's worth it or not or be able to recoup the investment back because I am doing this to help out my parents and myself. I figured its a win win situation. Stay by, have a cheap place to live with my own space and learn something out of the project. I never knew how tough it was to borrow 15k for a simple project. When I bought my first truck it was just go in sign ..
If you want instead to dump your parents house and plan for only a ten year horizon you have a whole different set of factors to consider, including the advisablity of making any addition when perhaps neither you nor your parents will recoup the investment.[/quote]
-I dont want to dump the house b/c I plan to rent it out later when I eventually inherit it.
So what should I do from do from here? Get info on what is left on the lein on the house?
When you buy a car/truck, the insured car/truck is collateral. In this case, you have no collateral. It's not your house.
You may be your parent's age, if and when, you inherit whatever might be left within their estate.
If they are like most folk, they will need every cent for their own retirement, medical expenses and extended care. None of us know what the future holds. They may need to use their own equity when they are old enough to qualify for a reverse mortgage. And God forbid, they might have to take care of you, if you became injured or got sick.
It isnt going to be a glamorus expensive addition. Just basically a roof, siding, lights, slab. It will be done all with inhouse except for the slab pouring. /quote]
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No framing, insulation, heat, A/C, gutters, drywall ?
The easiest thing would be to figure out what is going on with the "business loan" -- is this to another company? A bank? If folks put up house as collateral that will be recorded as a lien against the title at the Recorder's office in the country where the house is. You would have to get info from the folks that the money is owed to as to the terms / payoff.
If folks have "busines income" that might be good enough for them to get a HELOC.
I think you will find the rate on an unsecured personal loan are still sickeningly high -- easily double of triple what a HELOC might be...
If the title is not in your name you can't use the home as security, and as I said if parents are ill you really should plan in case you need more advanced care down the road.
It isnt going to be a glamorus expensive addition. Just basically a roof, siding, lights, slab. It will be done all with inhouse except for the slab pouring. /quote]
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No framing: yes, well be framed in house with material I have access to for a discount.
Insulation: yes, again done in house
Heat, A/C: Home has new complete unit installed that will accommodate the new added square footage by retrofitting it into the build. Again with the help of relatives that in the trades.
Gutter: no thanks
Drywall: yes, well be installed with helpers with material I have access to with discount.
Windows and doors: sure why not
I get where you are trying to go from here. Since I can practically frame and do most of the work besides the slab, the tab will not surpass my 15k mark. If anything 15k is more than I need considering I will not add a bathroom. I have access to different sources of material and help. This is why I choose to figure out how I can implement this idea into my own parents house. Since I'm in the county I just need to submit a drawing with specs for an approval. My boss is a Master license electrician and I am a license apprentice and will have no issues with electrical work. You are probably skeptical about adding an addition for about 15k. Yes it could be done especially with the knowledge, access of discounted materials and help by great friends and relatives. I know its a long shot (financially), but for the sake of my parents I will do whatever it takes to stand by them. My least concern about this project is the material and build out. (This is what I am trained and schooling for). Funding is the main focus. Granted my money from work is tied up into school, parents bills including my bills. If I had the spare means I wouldn't even bother considering a loan. Just trying to find different options.
The easiest thing would be to figure out what is going on with the "business loan" -- is this to another company? A bank? If folks put up house as collateral that will be recorded as a lien against the title at the Recorder's office in the country where the house is. You would have to get info from the folks that the money is owed to as to the terms / payoff.
If folks have "busines income" that might be good enough for them to get a HELOC. Question: what is HELOC?
I think you will find the rate on an unsecured personal loan are still sickeningly high -- easily double of triple what a HELOC might be...
Yes indeed. I checked today at a credit union. 8.25%
If the title is not in your name you can't use the home as security, and as I said if parents are ill you really should plan in case you need more advanced care down the road.
-When I mentioned ill i mean as they are old and fragile. Mom is 60% handicap so from the remainder of the funds left I wanted to use to modify a few things to make handicap friendly. EX: practice bar so she can practice to walk, a few restroom adjustments to help her get to her chair and back safely. Dad wants a patio to relax.
Thanks for your input, very informative.
DN
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