Can I lock in todays rates for a future building project?

December 22, 2008 7:43 AM

Mortgage Expert Needed: How do I take advantage of these low low mortgage rates BEFORE I gain building approval.

I currently own my home. Now that financing rates are crazy low its time to start planning that addition we've always wanted. Using home equity isn't an option since the cost of the addition would bring us well over our current home value.
Our only option SEEMS to be a construction loan but that requires that you have all your approvals before you can secure the loan.

My problem is that we need to complete a conservation commission review and approval before we can build. The problem with that is that we now have 2 freakin feet of snow on the ground and conservation won't even look at it until they can see the ground, spring at the earliest.

I'm afraid by then the loan rates will not be anywhere near where they are today and this will become less cost effective for us.

Is there ANY way to lock in today's rates for a future building project??
Are there ANY other options??

posted by Thrillhouse to Home & Garden (3 answers total)

Pull out as much equity as you can from the existing home, and bridge the gap with construction financing once your approvals are in place. I can't think of another way, off the top of my head.
posted by Chris4d at 10:22 AM on December 22, 2008 [1 favorite]

Best answer: On a new construction loan, you can often lock-in the current rate for X months (usually less than 6) for a certain fee - could be as low as a couple hundred dollars. Your best bet is to talk to the bank about this exact situation, shop around. The problem will be finding a bank ready to lend right now, especially if your equity in the home is relatively low.

I would also strongly suggest you consider your current financial state and the current housing market. Adding value to a house is a good thing, but perhaps this is not the best time. In our housing market right now, you could put $70,000 into an addition and it might not even increase the value of the home that much - because there are so many homes out there being sold at dirt cheap prices. In many areas, you cannot build a home right now for the prices homes are being sold. And we honestly don't know when we'll see the bottom of this.
posted by shinynewnick at 10:54 AM on December 22, 2008

I would also strongly suggest you consider your current financial state and the current housing market. Adding value to a house is a good thing, but perhaps this is not the best time. In our housing market right now, you could put $70,000 into an addition and it might not even increase the value of the home that much - because there are so many homes out there being sold at dirt cheap prices. In many areas, you cannot build a home right now for the prices homes are being sold. And we honestly don't know when we'll see the bottom of this.

Depends on what they want to do with the house. Who cares what the market value of the house is NOW if they don't plan on selling any time soon?
posted by gjc at 6:49 PM on December 22, 2008