Bridge to a New Home
Are you moving from your current fabulous home to your next? If you already own a home, chances are you are going to need to consider bridge financing to purchase your next home to make ends meet between selling your current home and buying the next.
Bridge loans are secured loans, requiring you to pledge your property as collateral. The lender will approve an amount of up to the full value of the property. This way, you can borrow greater amounts for purchasing a new home.
Residential bridging loans are short-term financial arrangement. This implies that the money is borrowed for few weeks to a year. It is when you have found the money from own source like by selling some old property that you can repay the principal amount in one time. Until then, you have the option of making the interest payments only.
However, despite being secured loans, interest rate is generally higher. This is because these are short-term loans.
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original article by Eva Baldwyn.
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Labels: bridgeloans, finances, financing, real estate
Add to the Fabulous: Dig out your Basement
The cost to dig a basement hole on our 1800 sq. ft. house was only $790. However, I have a feeling you want to know more than simply the cost of digging the basement hole.
Some of the other costs that you likely want to know about are::
........You need to dig the basement hole, which as I said was $790.
........How about pouring footings and foundations, which costs $6 to $7K
.......Then there is pouring flatwork cement for a tune of $1.00+ per square foot x 1800 sq ft = $1800.
.......Putting in sub-rough plumbing which can be $1,000 plus the cost of gravel and the excavator's charges.
.......There's the windows for your basement which includes window bucks of close to $500 (4 windows) and the corrugated window wells of $500 ...total $1000 + or -.
.......The actual windows cost $400+ depending on if you have a walkout basement with sliding glass doors, which would be plus the cost of the sliders.
.......Sealing the basement walls to prevent water leakage through the walls will be another several hundred dollars.
.......The cost to backfill around your basement adds a few hundred more.
.......Now the last question is how big is your basement going to be?
That $790 figure of digging a basement suddenly became a whole lot more didn't it? The reality is, however, that the real cost only involves a few of the above: digging the hole, flatwork cement, and windows, window bucks and window wells.
You still have to either poor a cement slab, or put in footings and foundations, which in the case of the later, go down to frost level. You still have backfill whether you have a basement or not. You still have sub-rough plumbing, with gravel before the slab. With a slab you will have furnace ducting to consider too.
Even though you have all the above items to consider in building a basement, it is still only a few thousand dollars more to add a basement, in comparison to the total cost of building your home.
Considering that your home may be worth $250 thousand to $400,000, your basement will probably only cost $7K-$10K+ added to the cost. All things considered, there isn't a better investment for that extra 10K in comparison to doubling the living space of the first level, that a basement adds.
As an example, consider the storage space it adds to your home. If you didn't have to rent storage space, what would it save you each month? Or wouldn't it be nice to park the car in the garage instead of using it for storage space?
In addition, the basement maintains an even temperature of around 59 degrees all year, so the cost of air conditioning in the summer is drastically reduced when compared with air-conditioning an upper story with the same amount of floor space.
If you build your home on a hillside, a walkout basement makes for a nice feature opening up the basement so it doesn't feel so “deep” in the ground.
Many people are putting home theaters in the area of the basement that doesn't have any windows.
The furnace, hot water tank and water softener can all go in the basement utility-furnace room and not take up precious main floor living space.
Some areas of the country are too close to sea level to have a basement, but if you live inland, having a basement is a real advantage when compared to the cost of putting one in. To dig a basement is a an economical way to increase the square footage of your home.
In reality, what is the cost to dig a basement? Very little, and the benefits far outweigh the negatives.
Labels: basement, renovations
A Fast Lesson In Mortgage Terminology
Adjustable Rate Mortgage (a.k.a. ARM Loan): An Adjustable Rate Mortgage is a home loan where the interest rate adjusts throughout the term of the loan. ARM Loans usually have an initial interest rate that is lower than that of a Fixed-Rate Mortgage. This low interest rate is locked for a set length of time. Once that time has expired, the interest rate can go up based on market factors. The lower initial interest rate helps those who can't afford a fixed-rate mortgage get financing for their home. However, the interest rate will most likely increase after the initial term of the low interest rate expires.
Annual Percentage Rate (APR): APR is the interest rate quoted by the lender plus additional home loan costs. Additional costs include origination fees, points, etc. APR is often higher than the stated interest rate. This is because the additional costs will alter the originally advertised interest rate accordingly.
Bridge Financing. A method of
financing, used to maintain
liquidity while waiting for an anticipated and reasonably expected
inflow of cash. Bridge financing is commonly used when the cash flow from a sale of an asset is expected after the cash outlay for the purchase of an
asset. For example, when selling a
house, the owner may not receive the cash for 90 days, but has already purchased a new home and must pay for it in 30 days. Bridge financing covers the 60 day gap in cash flows.
Another type of bridge financing is used by companies before their initial public offering, to obtain necessary cash for the maintenance of operations. These funds are usually supplied by the investment bank underwriting the new issue. As payment, the company acquiring the bridge financing will give a number of stock at a discount of the issue price to the underwriters that equally offsets the loan. This financing is, in essence, a forwarded payment for the future sales of the new issue.
Bridge financing may also be provided by banks underwriting an offering of bonds. If the banks are unsuccessful in selling a company's bonds to qualified institutional buyers, they are typically required to buy the bonds from the issuing company themselves, on terms much less favorable than if they had been successful in finding institutional buyers and acting as pure intermediaries.
There are 2 types of bridging finance. Closed bridging and Open Bridging.
Closed bridging finance is where you have a date for the exit of the bridging finance and are sure that the bridging finance can be repaid on that date. This is less risky for the lender and thus the interest rate charged are lower.
Open bridging is higher risk for the lender. This is where the borrower hasn't got an exact date for the bridging finance exit and may be looking for a buyer of the property or land.
Closing Costs: Closing costs are the expenses involved in finalizing a mortgage. Closing costs include lender/agency fees, loan origination costs, escrow payments, title insurance, attorney fees, etc. Closing costs are often shared between both the buyer and the seller.
Escrow: Escrow is at the end of the mortgage process where a neutral third party obtains the documentation and money involved in the transaction until the transaction is complete. An escrow account is also used to hold the property tax and insurance monies that are collected during payment of the loan.
Fixed-Rate Mortgage: A fixed-rate mortgage is a loan where the interest rate stays the same. It does not fluctuate while the loan is being paid off. Financing for fixed-rate mortgage loans are commonly spread out over 10, 15, 20, or 30 years. This type of loan is popular because there are typically no surprises. Since the interest rate remains the same, the monthly mortgage payments are static, and don't change year to year.
Points: Points are a percentage of the principal of the loan used to lower the interest rate of a loan. There are two types of points: Discount Points and Origination Points. Discount Points reduce the interest rate of a loan by having the lender pay more at closing. One point equals one percent. So, if you want to lower your interest rate by one percent, the borrow needs to pay one percent of the principal at closing. However, this does not lower the principal amount. It merely lowers the interest rate. Origination Points are used is the same fashion and utilized to cover the loan processing expenses.
Principal: Principal is the original amount borrowed from the lender. It does not include interest or other fees. It's the lump sum the borrower gets from the lender.
Knowing the lingo involved in your mortgage will help you stay on top of the mortgage process and allow the entire process to run smoothly. Read up on these terms and keep yourself out of the dark.
Labels: mortgage terminology
