Need home equity loan help
Question: I would like to take out a home equity loan to finance some renovations in a condo I am purchasing in New York City. I intend to make the condo my primary residence. The problem is, most lenders seem to require that you live in the home for at least 6 months prior to lending and I plan to make my renovations before I move in. Are there any lenders who will make a home equity loan shortly after I close on the purchase? The propoerty will have about 25,000 in equity, is valued at 225,000, and I need to borrow about 20,000. I could always borrow against my 401K if I have to, but would strongly prefer to take out a home equity loan. Any assistance would be greatly appreciated! Thanks!
Answer: You might want to consider bundling the cost of the work into the initial mortgage. Many banks will finance that more easily, and you get the benefit of a lower interest rate on the loan than you would get with home equity. So if it is worth $225,000, mortage it at $245,000. The bank will sometimes escrow the difference in a special account and pay contractors directly from it. Of course, the property must appraise at the resulting $245,000, and often they put time limits on getting the work done, and must approve contractors. Depends on the bank. I’ve done this twice and had great success with it.
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