Closed on Our Construction Loan and Other Updates
Last Friday we closed on our construction loan. The construction financing went surprisingly smooth. When we were first looking at purchasing the lot we were thinking about financing a small portion of the lot, but as we looked into this, we found that not many banks do financing on lots these days. If we were able to purchase the lot with cash we would have more flexibility in obtaining a construction loan.
Construction to Permanent Financing
One option for construction financing is a construction to permanent loan. With this type of loan, you lock in your rate for permanent financing when you close on the construction loan. Basically the lender will automatically refinance your loan to a permanent loan when you get the certificate of occupancy.
The advantage to this type of loan is that you only have to pay closing costs once, as you’re getting both loans at the same time.
The disadvantage to this type of loan is that you’re stuck with the same lender and their interest rate for the permanent financing might not be the best rate you could get.
Stand-alone Construction Loan
The other type of construction loan is a stand-alone construction loan. With this type of loan the construction financing and the permanent financing are two separate loans, which mean two closings.
The advantage to this type of financing is that you need less cash for a down payment which can allow you to stay in your current home during the construction.
Our Decision on Construction Financing
As we looked at our options, and I spoke to different lenders we chose to go with the stand-alone option. We decided this option was the best, as we want to stay in our current home for as long as we could during construction. If we did the construction to permanent financing we would have to sell our current house to help with a down payment.
Work is Finally Getting Done on Our Pacific Northwest Demolition
Beyond closing on our loan, which is important to continue with the project, work has started at the site. Our excavator put a fence up around the property this past weekend, which is required for the asbestos removal and just today the asbestos contractor showed up and has started doing some work.
I talked to him briefly and he said that more of the roof has fallen down and there was a lot of stuff in the kitchen. They were shoveling and removing all the junk off the kitchen floor, so they could get access the vinyl below. He also said that LRAPA has been holding him to higher standards than the DEQ would, so that is a little annoying. Unfortunately, the price of the different standards ends up falling on the property owner as it takes the contractor longer to do the work.
He also said that he should be able to get everything done in about two days, but there is a chance part of the roof may need to be taken down so that he can access all the spots he needs to; let’s hope that we don’t have to that so that he can get in and out quicker.
Another small issue that we had was that the placement of the current water meter, currently it is located where the new driveway is going to be. Unfortunately, there isn’t a way to do the driveway over the water meter so it needs to be moved. I was able to speak with the water company and they are going to get us scheduled to move the water meter in about three weeks. One bonus to moving the water meter is that we will be able to take advantage of common trenching for the water and sewer lines. I don’t think it will save us much, but anything helps.