Need help finding Low/No Equity Home Improvement Loan

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Submitted by biggoldbear on February 8, 2010 - 4:21pm

Here's my situation:
-I currently have mortgage insurance on my house that I would like to get out of.

-I'd like to build a room addition to our house which would likely get our LTV under 80%, allowing the bank to remove the PMI (~300/mo).

-I'd like to get a loan for the addition, preferably with monthly payments roughly equal to our PMI, thereby getting more house for ~same monthly cost.

-Anyone know of no/low equity home improvement loans that could fit this bill? Any knowledge about FHA title I?

-Any potential pitfalls to be wary of?

Thanks in advance

‹ I don't get it! Correction? ›

Unless the "value" added to
Submitted by LeaSD on February 9, 2010 - 11:08am.

Unless the "value" added to the house is materially more than the cost of doing the addition, I don't see this working mathematically. Leverage increases when the same amount is added to the value (denominator) and to the liability (numerator). Do you care to share your estimates of the costs and value-add as well as your current home value and loan amount?

Well, the general idea would
Submitted by biggoldbear on February 9, 2010 - 1:08pm.

Well, the general idea would be to get a loan that is not a "mortgage" so the liability (numerator) wouldn't change. I don't know if a Title I loan fits this bill, or if that would effect my LTV on the first?

Current owed= 369k
Current Appraisal = 410k (~Jan09, market has gone up a little since then)
current sq ft~1300
Would like to add ~200 sq ft master suite (bedroom with attached bath)

Cost:?
Value Added?

Not really sure on the last two, I know my neighbor across the street built on a room a couple years ago for ~30k to add ~150sq ft.

biggoldbear wrote:Well, the
Submitted by briansd1 on February 10, 2010 - 1:40pm.

biggoldbear wrote:
Well, the general idea would be to get a loan that is not a "mortgage"

Then the loan wouldn't be a home improvement loan secured by the house.

This reminds me of the off balance sheet debts of Enron.

I love all the thinking out of the box that has been going on in the last 20 years. It's just a way of hiding the debt that was accumulating. The risk was always there, but it was not captured by the traditional analysis tools/ratios.

Two years ago, I had a client
Submitted by sdrealtor on February 10, 2010 - 1:44pm.

Two years ago, I had a client who had the very same idea and he was going to do alot of the work himself. The addition never got completed and he lost the house going down in flames.

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