As far I know, this is legal. Your house is collateral for the Lender and according to what you are saying, the collateral isn't in the condition it needs to be to qualify for the loan. Lenders are really sensitive to appraisals right now. Your appraisal was approved with the condition that the home was finished. The value could change dramatically without the other bathroom. As far as I can see, your options are to finish the bathroom quickly or escrow the money until it is. With a "cost to cure" in the appraisal, your loan will most likely be denied.
I wish I had a more palatable answer., but it is what it is.
The very best of luck to you!
Michael D Delp
4802 Old Bethlehem Pike,
Telford Pa. 18969
email@example.com http://www.mortgagepro.instantlender.com -
And what I mean by us doing the work, is that we are hiring our own subcontractors after being ripped off by a general contractor.
I certainly know who I would not use as a realtor now.
No doubt you are an experienced attorney. Otherwise, why are you suggesting what's legal and what is not? Of course, if you are not one, perhaps one would do you much better by asking that question on a site dedicated to legal questions, not one aimed at Realtors and their products. None of us Realtors is competent to answer your question.
As a minor point, why do you think it would be Illegal for someone who is lending money based on the security of a house and property to set the terms under which they will lend the money?
Aside from any "illegality," I can easily see the lenderâ€™s point. First, you already have a loan to cover what you bought. How good are the changes you have made? While they sound nice, if I were a lender, I'd like to know that the work was done to commercial and building code standards. You say yourself that you are doing the work. Are you really as good as a Toll Brothers contractor? Maybe so, but a lender would like to have a representative check out your work.
The next problem that I see for any lender is the fact that the improvements are incomplete. If you were to fall into default, (and as unlikely as that may be in your case, still a lender must consider that outcome, don't you think?) the lender would be stuck with a work-in-progress to sell. It may be very hard to convince a buyer to buy the place "on the come," so to speak. So, having money in escrow to hire someone to complete the work may be the best way to solve your need (or desire?) to refinance and the lenderâ€™s need to know that they have a way to work out any problem that may arise. As an alternative, you might take out a construction loan, if you can obtain one in this market considering your current financial condition, what ever it may be.
It may be in your best interest to wait until you complete the work before refinancing. While rates may rise, there is certainly no guaranty that that will be the case. On the other hand, a clean deal may result in lower interest payments; less money borrowed (by the escrow amount, if no other,) and lower monthly payments.
As a final note, you seem to be operating on 2006 think, where borrowing every cent you can makes sense. That is very much "so last year"! What will happen if you have a financial reversal? Up to the hilt in debt, with a bathroom more than you claim to really need, you may find that you have joined the group of poster children for a society that borrowed to the max only to discover that someone lowered the workable max and that your payments exceed you ability by an amount that results in a disaster.
Think about it and pace yourself accordingly.
Best wishes with your new home.