Renovation Mortgages
So you’ve found a house you like. It’s in
the perfect location, it’s available, and
it’s affordable, but it needs more than
a little work. Before walking away from
the deal, you might want to consider
financing the purchase and the repair
of that home in one shot by taking out a
renovation mortgage in addition to your home
mortgage. This is a new financial device.
Combining the loans can save time and money
by eliminating the need for two appraisals and
closings, and you can often get both loans with
rates and terms comparable to a standard
mortgage. Like typical home mortgages,
renovation mortgages can be variable or fixed
rate loans for terms of 15 to 30 years. The
amount you borrow can be based on the cost of
the renovation project or the value of the
finished product, according to Gregory
Karabetsos, owner of Greater Pittsburgh Home
Equity in Peters Township.
Any home improvement project can qualify,
as long as it becomes a permanent part of the
property and increases the value. The flipside of
the coin: you can’t do the repairs yourself. You
have to use a licensed contractor.
Virtual tours are the way buyers are
shopping for a new home today. Open
houses are a thing of the past. With a
virtual tour, you can see every room in
great detail. This is especially convenient
for out-of-towners or even out-of-country
buyers who want to settle in our local
communities. The computer has become
an intricate part of our business.
- Janet Nassif, Keller Williams
But homebuyers shouldn’t
automatically object to ARMs,
mortgage experts say. Certain
people could save money by
taking out an adjustable
mortgage. This is especially true
if someone is only going to be in
a house for just a few years.
Taking advantage of those low
introductory rates before moving
on to a new residence (or
refinancing the ARM at a
favorable rate) could mean big
savings.
There is a serious risk
involved, though. What if, for
whatever reason, you end up
staying in the house longer than
planned? Without paying close
attention to market conditions
and interest rate movements, you
could find yourself facing gigantic
mortgage payments. “The
question I pose to people is: In
five years do you know whether
you’ll be in that house or not?”
Bringol says. “If you will be, don’t
expose yourself to the risk [of an
ARM]. It’s hard to predict where
interest rates will be.”
For those already in ARMs
and looking to get out, finding
the right moment is a matter of
timing. Consider a homeowner
who has an ARM at a 4.5 percent
rate that is set to re-adjust in two
years. If he were to re-finance
tomorrow to a 30-year fixed-rate
mortgage, his new rate would be
about 6 percent, which would
immediately raise his monthly
payment. The question he must
ask is: Between now and two
years from now, will interest rates
go up or down? If they go down,
he can re-finance at a later date.
But if rates go up, and he doesn’t
re-finance now, he’s going to be
stuck paying at an even higher
rate than 6 percent.
For the financially savvy, an
ARM can pay off big time. For
those who want to avoid fretting
over their mortgage payments
more than they already do, a
fixed-rate-mortgage might be the
more sensible way to go.
"The Pittsburgh market is unique and a
very good place to buy a home. Right
now, the factors – low interest rates,
stable pricing – are positive. We don’t
have wild swings here. Pittsburgh is like
a locomotive that keeps chugging along.
What we do have is the expertise to
know how to personalize a property so
that it suits the needs or lifestyle
of the buyer. Everything from room
enhancements to color coordination to
customizing each fixture."
- Grady Gaspar, Regional Marketing Manager, Ryan Homes
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