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Where are my real estate/mortgage experts?

dana316dana316 member
in Success after IF

We are applying for a loan to do a rather substantial addition to our house.

My question is this...do I have to do a down payment on a loan like that, since I already own my house?  If so, will the equity in our house count towards that? 

We have about 30k in equity...which will only amount to about 15% of the total loan value after the construction...

Thoughts?

TIA!

 

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Re: Where are my real estate/mortgage experts?

  • kme930kme930 member

    I am no expert, so take what I say with that caveat.

    Are you applying for a home equity loan? If so, you would just be borrowing on your home equity. So if your house was worth $100,000 and you had an $80,000 mortgage, you could borrow some portion of the $20,000 equity.

    Different banks and different loans all have different terms, but I would say a typical home equity line would allow you to go up to 90 or 95% loan-to-value, meaning you could borrow (in total) 90-95% of the value of your home. So in the example above, if your house was worth $100,000, you could have up to $90-95,000 of debt. Subtract your $80,000 mortgage and that means you could borrow between $10-15,000 depending on the kind of loan you get.

    Usually you have to reappraise your home when you do a new loan like that, so that $100,000 in my example would be based on a current appraisal.

    (A second mortgage - where you borrow in a lump sum instead of having a line of credit - would function similarly and would not require a downpayment but would be limited to a certain percentage loan-to-value.)

    I hope that helps!

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