Construction remodel loan: Private vs Bank?

4 Replies

I have a loan strategy question that I bet will help a few people in similar situations! 

Quick on me: I own 2 SFR houses and I recently bought a third property that is a SFR and an ADU on a large lot w two garages. I am converting one garage into another ADU. I'm looking for a 60k construction loan to do this. I have already used 0% 15 month APR credit cards and cash for work on the house remodel (yes, I have a plan to pay them off).

I was thinking of getting a HELOC for the 60k loan, but my DTI is too high ( and my parents have no income for co-signing).

OPTIONS:

1. I have a private money lender who has offered me a 10% loan at 100% LTV w no points. And a flexible term (6-18 months).

2. Otherwise, I was going to look for a bank loan and try to get something that charges me as I draw (vs getting one big loan all at once) and slightly lower interest. But I'm having a hard time finding one that has no points and also mainly - that does not balk at my DTI.

Does anyone know of some really good funding sources/banks? 

Or does the private money lender sound like the way to go? My mortgage broker thinks I should do this ( he is also a friend). 

My plan to pay off the 60k loan is the refi the house once all of the work is done. OR get out a HELOC at that point once I have rents coming in and my DTI goes up.

Thanks! 

Hey @Robin A Jackson

A loan of 100% LTV at a 10% rate, a 6-18 month term, and I'm assuming no points at closing (you didn't mention any, perhaps double check this with the lender) is a great option. As long as the appropriate docs are in place with the lender (so you're fully aware of all the terms/conditions of the loan) and you have a verified exit strategy (refinance or sell at a price that would cover the debt), I would go with that option.