Need some info from Haplo!!!

bttrahan · Joined: 09 Jun 2007 Posts: 1

My wife and I purchased a lot to build our home last August using a HELOC. We own a home presently outright with $0 mortgage valued at $88,000 at the time. The lot was $42,000 of which we are presently paying only the interest on it. We expect that we will need about 200-250k to build our NEW home. We are willing to use our present home in any way possible to help lower the monthly mortgage bill. Can you tell me, from the information I have given you, about how much of a monthly mortgage note we are looking at considering what we own and what we would like to borrow on a construction loan? Also, we have excellent credit and will be renting our present home. Thanks for ANY help!

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

Well, to start off with I'm not a financial advisor. This is a scenario you would want to run by one (and I don't mean an investment rep from Edward Jones or something like that.)

If you are planning on renting the home you are in now, you have a couple of options. You can use some of the equity in that home to put towards the new one, and thus have your rent off-set the payment. This would likely lower the payment on your first mortgage, but obviously you'd still have your investment property lien to deal with (which would be at a higher rate, for it's investment status.)

Since your question was "How much are we looking at" the direct answer is it depends. There are a number of mortgage calculators out in cyberspace, and any one of them could give you a close idea. An easy one to use is 6% on $100,000 = $600. So for your $250k figure, that would be $1500. On top of that you'd have taxes, insurance, association dues, and any PMI depending on the loan type.

6-7% is around the area I'd look at for numbers right now, because of the way the market has been climbing over the last couple of weeks. It's definitely better to prepare for the worst, and then be pleasantly surprised when it's just not as bad as you thought it was going to be.

Either way, your current home having no mortgage won't really change much from my way of thinking now. Unless there is some tax reasons that may help, it'd probably be best to keep as much of the interest coming from your primary residence than from investment properties. Again, I'm not a CPA or a financial advisor, so I don't know all of the specifics to those little details.

Hope that helps, and if you have some more questions just shout em out!