Wow, that is an ugly image, but you get the idea. We’ve got our financing lined up now and are going through the document signing process.
I probably called a dozen or so banks during this process and have a very detailed understanding of the types of loan products that are available through all of them. The decision to go home equity versus construction loan, when you actually ran the numbers, wasn’t much of a decision at all.
Equity lines are still fairly expensive unless you only get 80% loan to value financing. Unfortunately, for what we want to do, we would have had to go 100% loan to value and even then, it would have been tight. We opted to go with a construction loan and went with First Horizon.
First, we’ve worked with FHHL in the past and have a great relationship with Chris Mohammed, our agent. Chris is extremely smart and understands this business better than anyone I’ve ever spoken with. It is a pleasure to work with her, too. Second, FHHL has an incredible construction loan product right now.
One of the things that we really liked about a lot of the construction loans that we looked at was that there was no payment due while construction was going on. Essentially, we get an interest reserve where the interest from the money that we use goes into a pot and after the construction is finished, we roll everything into a traditional mortgage. Most of the products that we looked at had rates of 8 – 10% for the construction loan (Moose and Rocco come break your fingers if you miss a payment) and something more manageable for the traditional loan.
FHHL’s product puts the construction rate at the same rate of traditional mortgage. Essentially what you are getting is a 31 year loan (or 6 year loan) and not having to pay anything for the first 12 months or until your construction is finished. It is a great deal and the most aggressive that we saw out there.
If you’re interested in talking with Chris, you can reach her at her site.