15 Sep How Do I Build a Custom Home While I Still Own a Home?
This is a question that we often hear and one that should be thoroughly considered before you begin on you dream home journey. In the end, you will need to decide your comfort level with risk in order to determine the best way to go forward with your dream to build a new custom home.
There are two alternatives to consider when you want to build a new custom home and currently own a home.
Selling Your Current Home Before Starting Construction of the New Custom Home
This option allows you to know exactly the amount of money you will have for your new custom home project. The downside of course, is that unless the buyer allows you to remain in your existing home, you will more than likely have to account for living expenses in temporary arrangements and to move your furniture not once, but twice.
In a perfect scenario, the buyer of your current home would wait to settle until your new custom home is finished, but generally, buyers want to complete the purchase and move in as soon as possible.
One option is to suggest to the buyer that they consider purchasing your current home but allow you to remain in the home and pay rent until you can move into your new custom home.
Another option is to sell your current home and rent a home or apartment until you can move into your new custom home.
Of course, this means finding a short term rental, but it would save you the uncertainties of starting construction on your new custom home before the buyer of your existing home has secured financing and met all contingencies.
Starting Construction on Your New Custom Home Before Selling Your Existing Home
This option makes things easier with respect to your move from your present home to your new custom home, and avoids the need for temporary housing.
That said, there is obviously a risk not knowing the exact amount you will get when you complete the sale of your existing home and it can be a financial challenge if your current home does not sell as quickly as expected.
With a construction loan, you only pay interest on the amount of the mortgage as it is advanced to cover the various stages of construction so you are not making a full payment until the end of construction.
Some lenders offer a blanket mortgage on both your present home and the new home to be built. Once the current home sells, the amount of the mortgage is reduced by the sale proceeds. It does require qualifying for the loan amount on both properties.
Getting a Home Equity Line of Credit When Building a New Custom Home
A home equity line of credit could be another option. HELOC’s as they are called can typically be interest only for 1-2 years with a maximum loan amount of 85% of the value of your current home.
Still have questions about what is best for how to proceed with building your dream home? We welcome you to request a free consultation. We will be glad to help you sort out options so that you can realize your dream for a new custom home.