Move Up in You Own Home or Move Out?
Considering the high value of real estate, major remodeling rather than moving to a larger house, has become very popular. However despite the increased values most homeowners simply don’t have enough equity in their homes to use the proceeds from an equity line to accomplish their goals.A construction loan solves this problem, as it is based on the future rather than the present value of the property and normally allows for things like contingency reserves, interest reserves and closing costs.Obtaining a construction loan rater than moving has a number of advantages:The homeowner will face a much smaller real estate tax compared to moving since a remodeled home’s value is assessed based on that of the original purchase price plus the cost of construction of the additional are. The remodeling cost of the original house plays no role in increasing taxes though it affects the value tremendously.Rules vary from area to area and the details should be checked with the local authorities, before embarking on a remodel project. The homeowner will end up with a property that is exactly the dream home imagined. Moving up not only increases ones real estate taxes but in most cases means settling for a compromise and still doing additional work at a substantial cost.The best advantage of a major remodel compared to a new home purchase is the fact that typically in a remodel the home owner ends up with added value to the property that is around a 15 if not around 20 more than the cost of construction.The things to consider when contemplating a major remodel are not to get carried away and overbuild for the area. Time must be spent in studying the area to see what kind of a value the house will have as compared to recent sales and/or listed properties and aim to remodel up to an optimal size for the area.construction loan, as mentioned above will normally allow for a contingency reserve and an interest reserve. The former simply sits there just in case there are cost overruns and the latter pays the mortgage payments during the construction period, allowing the homeowner more flexibility in managing cash flow.In short, a major remodel can put you in the house of your dreams while saving you money in the long run and increase your equity
About the Author
Raz Vartanian is a carrier mortgage professional specializing in the origination and closing of residential construction loans. Visit their website at: http://www.constructionloancenter.com/
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