Another very naive question about a dormer/extension

How do you go about getting the $$ for it do you apply for a loan? Do you somehow pull put equity? How does it affect your mortgage I'm a newbie here with a groing family and I think in the near future we will be needing more space.

Re: Another very naive question about a dormer/extension

We are saving for ours. We dont want to take a loan for it.

Re: Another very naive question about a dormer/extension

There are a few different ways depending on a lot of different factors.

Of course you could pay it cash if you have the cash.

You could pull it out of equity but the trick would be that nowadays almost no bank will let you borrow more than 80% of your appraised value. So you'd have to have substantial equity in the home as it is.

Another option is a 403b loan which is probably the most common product a mortgage company will try to sell to you and sometimes is the most viable. However, i have to warn you that they make you pay an upfront PMI fee as well as mandatory PMI for the 5 five years even if you have more than 20% equity. This is an FHA loan. Viable option but very expensive in my opinion.

Construction loans seem to be coming back to the market although I don't really know too much about them. I think you close on a bridge loan to do the work and the refinance when it's done. Again, not sure of the details.

The product we are going with is a standard 30 year fixed loan where you need to prove that you currently have at least 20% equity and that you will also have 20% equity when the project is complete. It is a local bank in NJ that offers it but we did have to use a broker and I think we have to pay her 1% commission which stinks. But in the end it was the cheapest option and the best rate.

Shop around! you'll learn a lot about that 403k loan I'm sure.

Re: Another very naive question about a dormer/extension

We're saving, and just doing the bare bones extension. We'll do all the electrical, plumbing, etc...ourselves and with the help of family. We don't have any immediate plans for babies, so we're not in a rush.