A New Way to Pay

If you’ve listened to our podcast for a while, you know we like to talk about finances. Not in a scary, spreadsheet-heavy way. More in a real-life way. We do this because whenever you take on a major remodeling project, one question shows up sooner or later...

How are we going to pay for this?

For bigger projects, a construction loan has often been a smart answer but traditionally, there was one part of the deal that made a lot of homeowners hesitate: it wasn’t the loan itself but hat happened at the end.

Construction loans have been a great option for big projects
When you’re doing a substantial renovation, the numbers get real fast: A kitchen update is one thing. A major addition or whole-home renovation is another. And let's be real, not everyone has a pile of equity sitting in their house ready to tap, especially if you bought recently, or if the home has not appreciated enough yet.

Construction loans are helpful because they can be based on the after improved value of the home. In plain English, this means the bank isn’t only looking at what your house is worth today; they’re looking at what it will be worth when the renovation is complete.
This is a big deal (didn't you see the italics?) because it gives homeowners a way to fund a large project based on the value they’re creating.

The old downside was the refinancing that came at the end
Here’s the part that has been frustrating for a lot of people: with many traditional construction loans, the loan is temporary. When construction is done, the homeowner has to refinance into a new permanent mortgage. That’s been the sticking point on these loans for a lot of people, and it’s a bigger issue now than it used to be, because a lot of homeowners have very low interest rates locked into their existing mortgage.
If you refinanced a few years ago, the thought of giving up that rate can be enough to stop the project in its tracks.

But now there's another option: the Construction Second Mortgage
This is what I’m excited about!

We have a banking partner we refer clients to sometimes when the financing needs to be thoughtful and customized. They’ve introduced something called a Construction Second Mortgage, and it solves the biggest pain point of traditional construction loans.

Here’s what it does:
1. It can lend up to $1,000,000
For major renovations, you need a serious tool. This program can lend up to $1,000,000. That opens up real flexibility for large additions, major renovations, and complex scope projects.

2. It can appraise based on the after improved value
Just like a construction loan, the appraisal can be based on the after improved value of the home. This is critical for homeowners who don’t have a ton of equity today, but are making an investment that will significantly increase the value of the home when the work is complete.

3. You do not have to refinance your existing mortgage
And this is the game changer. With this option, you do not have to refinance your existing first mortgage at the end of the construction term. Meaning, if you already have a low interest rate and you want to keep it, this option will allow you to keep it.
For a lot of homeowners, this completely changes the math.

This is a great solution if:

• You’re planning a major renovation and need substantial funding
• You don’t have enough equity for a standard home equity loan
• You want financing based on the after improved value of the home
• You want to keep your current mortgage and interest rate

The way we see it, this new loan option helps homeowners move forward with large projects without feeling like financing will force them into a long-term sacrifice.

Big remodeling projects should feel exciting. They should feel like an investment in your home and your quality of life and your financing should support that.

If you’re considering a large renovation and you want help thinking through the options, we’re happy to talk through your project and connect you with the right people.

Because the goal isn’t just to get the project done but to do it in a way that fully supports your home, your timeline, and your financial picture.