Can we use existing equity in our property to build a 2nd home?

Asked by ivymwood, 17222 Sun Dec 9, 2012

We own 3.5 acres with one existing home. We considered building a very large 1500sqft addition to the existing home, which was fine with the bank (6 months ago). Put plans on hold to really think about things, and have now decided we want to build an entirely separate 2nd home (still 1500-1800sqft) on the property - since there's plenty of land. Can we use the equity in the current home/property to get a loan do this?

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6
, ,
Mon Feb 17, 2014
Yes, you would apply for a home equity line of credit and once approved it would be like a cash account. You would make payments on only what you withdraw. If you have a payment on your current home it would continue the same as it is now.
0 votes
ivymwood, Home Buyer, 17222
Fri Dec 14, 2012
Thanks to all. The property has been in the family for 4 generations and will not be sold - probably ever. The 2nd home is to accommodate the continued expansion of family on the property. We will not have to subdivide, and as the existing property & home are owned outright, we have enough equity to do this. Township has issued a construction permit, and we are moving forward!!
0 votes
Jim Simms, Mortgage Broker Or Lender, Louisville, KY
Fri Dec 14, 2012
Possibly, if you have enough equity in the existing home to do a cash-out refi. But consider subdividing the property into two lots; just because you can do something does not mean it is a good move. The problem isn’t getting in, it is getting out that is a problem. Almost everyone focuses on putting a deal together with little or no thought on an exit strategy. Putting two homes on one lot may make both homes unsalable. The next buyer may not be able to finance the package, thus diminishes the buyer pool. Good luck,

Jim Simms
NMLS # 6395
JSimms@cmcloans.com
Financing Kentucky One Home at a Time
Web Reference:  http://jamessimms.com/
0 votes
Sarah Goulart…, Agent, Plymouth, MA
Fri Dec 14, 2012
I would guess that the bank will be ok with lending the money, you just need to work on the permitting and permission through your town, which may be a bit more complicated.
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Jim Cramer, Agent, Waynesboro, PA
Sun Dec 9, 2012
I believe your Bank should be fine with this. Go back with your plans and see what different types of Loan options they offer your and the terms. If you plan to ever try to sell the second property make sure your lot can be subdivided and you place the second property correctly on the lot.
0 votes
Alan Openshaw, Mortgage Broker Or Lender, Southampton, PA
Sun Dec 9, 2012
Hello Ivymwood.

The answer is yes. However there are also legal implications to this project. If you do not crerate a seperate parcel, that may be a zoning issue. If you do create a seperate parcel the lender will have an issue with that. It can be done but you need to keep it legal

Regards,
Alan Openshaw
Cornerstone Lending Inc
Southampton Pa 18966
215 953 0800
cell 267 992 7276
VOTED BEST IN BUCKS 2010 & 2012
NMLS ID 143960
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