Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
My family and I bought our first house (in Bellmore) about a year and a half ago. We really love the area, we have great neighbors, a large-ish property, and we even have a creek behind our backyard! The house is also nice as it was fully renovated (albeit with low-ish to mid-range finishes and quality) by the person who sold it to us. And while we have 4 decent-sized bedrooms (all upstairs) and 2 full bathrooms, at 1,568 square feet, the “living space” (living room, kitchen, dining room) is very compartmentalized and pretty tight feeling, especially the living room. Additionally our house has no basement (built on a slab) and no garage (it was converted into a dining room by the previous owner as part of the renovation). We have a large attic and we installed a very large shed so we’re not particularly low on storage space, but we do lack “extra” living space like a basement that could be finished and used as a den or something like that. We’re a young family currently with 1 small child and 1-2 more children planned in the future. I’m concerned that we will outgrow our current space.
We have a generous backyard and could definitely build an addition extending the entire back of the house about 15 feet, both stories, giving us an additional 930 square feet. We would basically gut the entire first floor making way for a new open layout with a large living room, dining area, kitchen, and we’d close off the existing dining room with French doors turning it into a separate den. We’d also be moving the bathroom and adding a laundry room. Upstairs we’d add a 5th bedroom and convert one of the bedrooms into a master suite with its own bathroom and walk-in closet. So the house would become a 5 bed, 3 bath, 2,500 square foot house. Additionally we’d do a few other things like replace the entire roof, add new siding to the whole house, add a portico, replace the front door, add a window to the den, enlarge/replace a few windows, add all new wood flooring throughout, and add a new paver patio in the backyard.
We’ve spoken to a few contractors and gotten 2 quotes for about $220K for everything, so we’re bracing ourselves for $250-260K in reality. My first question is: would this be a good investment? If we spent $250K, would our house increase in value by $300K, for example? Or would it maybe only increase by $200K, or even less? I know no one can tell me for certain without knowing every single detail but a general idea of how these things go would be great. If we’d gain even more value than what we’re spending we’d probably want to go this route and have an amazing house in an area we already love. However if for whatever reason we weren’t gaining the value I’d hope for after spending what I consider to be a massive amount of money, we’d probably be interested in moving to a larger home nearby within the next few years.
My other question is about loans. Given that we’ve only owned the house for a year and a half, we currently don’t have very much equity. We’ve spent about $35-40K on improvements (pavers and new driveway in front, landscaping in front and back, new shed, new PVC fence, and a bunch of other things) since moving in, though I doubt we’d ever see that money again. We have an FHA mortgage (with an insanely high PMI, but only 3.5% interest) and we put very little money down so if we currently have $50K in equity, I’d be impressed. What type(s) of loan(s) should I pursue to get this work done? Is there a way to refinance my existing mortgage and include the additional $250K I’d need for this project all in one loan? Another thought I had (which may not even make sense) – if I could refinance and add the $250K to it, and if the bank calculates what my home would be worth after the addition (which hopefully would net me even more value than the $250K), would it be possible to be rid of PMI, or at least reduce it? Though a concern about refinancing is that rates are higher now so even if I could somehow get rid of the PMI, it may work out to be a wash.
So to recap, I’d like to hear opinions as to whether it makes more sense to build out or just buy a larger house, I’d like help in figuring out what loans may be available to me (we have the income to justify it), and also if there’s a way to lessen my current PMI in the process. I’ve included a ton of info here so any other questions, concerns, and/or feedback is welcome! Thank you!
My family and I bought our first house (in Bellmore) about a year and a half ago. We really love the area, we have great neighbors, a large-ish property, and we even have a creek behind our backyard! The house is also nice as it was fully renovated (albeit with low-ish to mid-range finishes and quality) by the person who sold it to us. And while we have 4 decent-sized bedrooms (all upstairs) and 2 full bathrooms, at 1,568 square feet, the “living space” (living room, kitchen, dining room) is very compartmentalized and pretty tight feeling, especially the living room. Additionally our house has no basement (built on a slab) and no garage (it was converted into a dining room by the previous owner as part of the renovation). We have a large attic and we installed a very large shed so we’re not particularly low on storage space, but we do lack “extra” living space like a basement that could be finished and used as a den or something like that. We’re a young family currently with 1 small child and 1-2 more children planned in the future. I’m concerned that we will outgrow our current space.
We have a generous backyard and could definitely build an addition extending the entire back of the house about 15 feet, both stories, giving us an additional 930 square feet. We would basically gut the entire first floor making way for a new open layout with a large living room, dining area, kitchen, and we’d close off the existing dining room with French doors turning it into a separate den. We’d also be moving the bathroom and adding a laundry room. Upstairs we’d add a 5th bedroom and convert one of the bedrooms into a master suite with its own bathroom and walk-in closet. So the house would become a 5 bed, 3 bath, 2,500 square foot house. Additionally we’d do a few other things like replace the entire roof, add new siding to the whole house, add a portico, replace the front door, add a window to the den, enlarge/replace a few windows, add all new wood flooring throughout, and add a new paver patio in the backyard.
We’ve spoken to a few contractors and gotten 2 quotes for about $220K for everything, so we’re bracing ourselves for $250-260K in reality. My first question is: would this be a good investment? If we spent $250K, would our house increase in value by $300K, for example? Or would it maybe only increase by $200K, or even less? I know no one can tell me for certain without knowing every single detail but a general idea of how these things go would be great. If we’d gain even more value than what we’re spending we’d probably want to go this route and have an amazing house in an area we already love. However if for whatever reason we weren’t gaining the value I’d hope for after spending what I consider to be a massive amount of money, we’d probably be interested in moving to a larger home nearby within the next few years.
My other question is about loans. Given that we’ve only owned the house for a year and a half, we currently don’t have very much equity. We’ve spent about $35-40K on improvements (pavers and new driveway in front, landscaping in front and back, new shed, new PVC fence, and a bunch of other things) since moving in, though I doubt we’d ever see that money again. We have an FHA mortgage (with an insanely high PMI, but only 3.5% interest) and we put very little money down so if we currently have $50K in equity, I’d be impressed. What type(s) of loan(s) should I pursue to get this work done? Is there a way to refinance my existing mortgage and include the additional $250K I’d need for this project all in one loan? Another thought I had (which may not even make sense) – if I could refinance and add the $250K to it, and if the bank calculates what my home would be worth after the addition (which hopefully would net me even more value than the $250K), would it be possible to be rid of PMI, or at least reduce it? Though a concern about refinancing is that rates are higher now so even if I could somehow get rid of the PMI, it may work out to be a wash.
So to recap, I’d like to hear opinions as to whether it makes more sense to build out or just buy a larger house, I’d like help in figuring out what loans may be available to me (we have the income to justify it), and also if there’s a way to lessen my current PMI in the process. I’ve included a ton of info here so any other questions, concerns, and/or feedback is welcome! Thank you!
You can refinance your current mortgage and add the $250,000 in work to your current loan through a 203k loan (provided the total loan amount is $625,500 or less assuming this is a single family home). The bank does caluclate the value based on what the house would be worth after the work is complete. However, since the 203k loan is a FHA product you would still have mortgage insurance.
There are also Conventional loan products out there in which you could basically do the same thing and it would be based off the value with the work being complete. However, considering you only have 40-50k in equity now, it would be very unlikely that you would gain enough value to get under the 80 LTV to get out of the PMI even with a Conventional loan
There's not enough information to answer the first question.
For instance, if you improve a $300k house with an additional $250k in a $400k neighborhood with proper comparables, the answer is no; if it's a $600k neighborhood, you could possibly break even (maybe make something?).
For the second question: it depends. There are renovation loans and 203(k) loans out there which might work for you. The total loan would be based on after repair value (ARV) and once your existing mortgage is satisfied, the lender will release the funds needed for the construction as the work progresses. This is a very broad description--I'm leaving out the details and the programs vary.
The big question in this case is, would you qualify for the new mortgage? Some lenders can make it work with 10% down/equity to avoid PMI - anything less than that and you'll be paying it.
You can refinance your current mortgage and add the $250,000 in work to your current loan through a 203k loan (provided the total loan amount is $625,500 or less assuming this is a single family home). The bank does caluclate the value based on what the house would be worth after the work is complete. However, since the 203k loan is a FHA product you would still have mortgage insurance.
There are also Conventional loan products out there in which you could basically do the same thing and it would be based off the value with the work being complete. However, considering you only have 40-50k in equity now, it would be very unlikely that you would gain enough value to get under the 80 LTV to get out of the PMI even with a Conventional loan
Yeah, I figured that would be the case with the PMI. Even if I gained some value it'd likely be nowhere near 20%. Unfortunately, with the 203k FHA loan, the total loan amount would be over $625,500, so I guess that doesn't really work for us. Thanks for the info though!
1) Since your house is 1,568 if you expand 50% or greater Nassau County will call it new Construction if you expand 784 square feet or higher it will most likely jack your taxes up.
2) If you are in a flood zone and expand 50% or greater if your are on a slab expect your flood insurance to fly through roof or pay to raise it.
3) Home Improvement Property Tax Exemption in Nassau county allows a slow phase in of extra taxes over several years for renovations that cost between 30k and 80K. You renovation is over 80K so your taxes will rise right away.
4) Also are you sure the garage changed to living space is permited? If not that is another can of worms when inspectors come to house.
5) What is your property taxes now and on top of loan what is most you can afford. Nassau County if you will meet with them they will tell you the approximate increase in taxes. My neighbor expanded greater than 50% and did all the things you did. Two years after it was complete they raised her taxes from 9k to 18K a year and the mortgage payment shot up.
I think you need to consider the difference between additional market value and assessment value. Clearly, the town will look to bump your tax assessment by the dollar amount spent. However, the general rule of thumb is that you'll receive 60 cts increase in market value for every dollar capital improvement. Stuff like expanding master suites, upgrading kitchens, and finishing basements tend to add more value while adding additional bedrooms or baths don't add as much value. The best way to gauge this is to look at sales comps for similar props in your neighborhood with the upgrades you are considering.
Another consideration is when making major upgrades, will the finished product be of similar design and architecture to homes with the same amenities. I have seen people take smaller houses and expand them in some seriously unusual ways that do not add much (if any!) market appeal or value. People generally want traditional home layouts and funky layouts are a major turnoff.
1) Since your house is 1,568 if you expand 50% or greater Nassau County will call it new Construction if you expand 784 square feet or higher it will most likely jack your taxes up.
2) If you are in a flood zone and expand 50% or greater if your are on a slab expect your flood insurance to fly through roof or pay to raise it.
3) Home Improvement Property Tax Exemption in Nassau county allows a slow phase in of extra taxes over several years for renovations that cost between 30k and 80K. You renovation is over 80K so your taxes will rise right away.
4) Also are you sure the garage changed to living space is permited? If not that is another can of worms when inspectors come to house.
5) What is your property taxes now and on top of loan what is most you can afford. Nassau County if you will meet with them they will tell you the approximate increase in taxes. My neighbor expanded greater than 50% and did all the things you did. Two years after it was complete they raised her taxes from 9k to 18K a year and the mortgage payment shot up.
Thanks for your feedback!
1) I'm prepared for a significant increase in taxes.
2) We're not in a flood zone.
3) I figured it would be immediate.
4) Yes, we have all permits.
5) That's a big increase! Luckily we have neighbors with the exact same house as ours who did very similar additions and we know what they pay in taxes, so we have a pretty good idea of what to expect.
I think you need to consider the difference between additional market value and assessment value. Clearly, the town will look to bump your tax assessment by the dollar amount spent. However, the general rule of thumb is that you'll receive 60 cts increase in market value for every dollar capital improvement. Stuff like expanding master suites, upgrading kitchens, and finishing basements tend to add more value while adding additional bedrooms or baths don't add as much value. The best way to gauge this is to look at sales comps for similar props in your neighborhood with the upgrades you are considering.
Another consideration is when making major upgrades, will the finished product be of similar design and architecture to homes with the same amenities. I have seen people take smaller houses and expand them in some seriously unusual ways that do not add much (if any!) market appeal or value. People generally want traditional home layouts and funky layouts are a major turnoff.
Great point! We'd never do anything awkard or whacky. We have very traditional taste and we'd want the house to seem as though it was built that way from the get-go.
It is VERY UNLIKELY that an addition will raise the resale value of the house anywhere near what the addition actually cost. Only do it if you plan to stay in your house forever.
It is VERY UNLIKELY that an addition will raise the resale value of the house anywhere near what the addition actually cost. Only do it if you plan to stay in your house forever.
Why would that be the case?
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
