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I co-own an unfinished house with my ex-wife. Once finished, the house will be worth approximately $450,000. There is no current mortgage on the house -- we own it outright. I'm about 6 months away from completing the house.
Once finished, I'll need to get a $225k mortgage, so I can buy out my ex's half (per our divorce agreement) and repay personal loans (taken in order to complete the house).
The house will become a Bed & Breakfast, in a Hawaii location where B&Bs do very well. So mortgage payments will be covered by that income.
I have a 790 credit score, and worked 10 years for the same government employer, leaving one year ago in order to take on this project.
You might be able to get some local lender to write a loan for this but it won't be at an attractive rate and it won't be easy.
The ease of getting mortgages in the US has a lot to do with the participation of Fannie Mae / Fresdie Mac -- together with FHA essentially all US mortgages end up being backed with government guarantees. To get a mortgage under those programs the Borrower has to have income / debt inside limits AND LIVE IN THE HOME.
Commercial properties like Bed & Bath have orders of magnitude more defaults. Just not worth the risk for lenders!
Frankly I don't understand how / why any sane person would bother taking out personal loans for this, even worse what were you thinking qutting a job, especially a secure government job in a high cost of living area like Hawaii to do something so risky? That is going to raise some questions at any lender...
Do you have any connections with other folks doing this? Maybe they could buy you out / be a partner or at least give a tip as to what lenders might be able to take this on...
Last edited by chet everett; 12-29-2014 at 01:16 PM..
Thanks for replies. To clarify: I'll be living in the home as well, so it is my personal (and only) home, not just a B&B. It's a 5-bedroom, 2-bath house.
Worse-case scenario I get another job (my skills are fairly in demand, so it wasn't quite the wild leap you imagine ) but I'd rather not, if I can make the B&B fly. But if I can qualify for a mortgage, that'd be the route I'd rather take, given low interest rates.
Background:
Back when I was still employed (but living on a different island) I inquired with local lenders but they said no way they'd do a mortgage without the house being completed. So the personal-loan path to completion seemed the most straightforward, given the crazy-high sums contractors charge (and the fact I have all the skills to do it myself.) Not to mention I was fed up with the job
I'll assume you're going to reside in the Master bedroom which typically has its own bath. Why in the world would you build a B&B with all the other bedrooms sharing 1 bath? I can't imagine that would be a very popular place to stay if everyone is trying to take turns...
I'll assume you're going to reside in the Master bedroom which typically has its own bath. Why in the world would you build a B&B with all the other bedrooms sharing 1 bath? I can't imagine that would be a very popular place to stay if everyone is trying to take turns...
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Mortgage companies/banks are not likely to lend to a self-employed person without 2 years of documented income history from the business. Borrowing on the equity still requires evidence of ability to make the payments. A brand new B & B is not likely to help. The key to success is usually that the family runs it,
husband, wife, maybe an older kid or parent to help out. Having to hire help adds a lot to the expenses of running it. You may be able to pull this off (good luck!) but it seems to be more sensible to sell, split the money and buy your own place.
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) but I'd rather not, if I can make the B&B fly. But if I can qualify for a mortgage, that'd be the route I'd rather take, given low interest rates.
Surfers pea while they paddle brah...
