Question:

My husband and I purchased a bungalow for $224000. We put in about $35000 in upgrades. I believe my house is worth about $270 000 and we live in a very desirable neighbourhood.

We'd like to do a major addition to our home. Either an entire second floor or a great room and garage with a room above the garage.

We estimate that we would need about $100000. How would one go about getting this money if you don't have enough equity in the home. We have about $45000 in equity in our home.

I am quite certain that our home would appraise very well with the addition, based on what homes in our area are selling for.

Thank you, Heidi

Answer:

Heidi,
There are two parts to the answer to your question. It is possible to re-finance your home up to 90% of its value today. In other words, if your home is worth $270,000, you can re-mortgage it up to a maximum of $243,000. When you subtract your existing mortgage amount from $243,000, that leaves you with a cash sum that is currently available for the cost of the addition. If what you have is sufficient, end of story. If there is a shortfall, it will need to be financed separately, either with a temporary credit line or through private mortgage sources. Once all the renovations have been completed, it is then possible to re-visit 90% financing based on your home's increased value. Do not attempt to refinance your home while it is under construction.

Answered By: John Lozinski

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