Refinance with 203k rehab money left over

[Redgy Saint-Germain]

Hello guys,

I am a newbie here and seeking for some answers regarding an FHA loan. I bought a property using a 203k rehab loan and I was wondering about what will happen if you have reno money left over in your escrow account when you refinance your property?

Redgy

[Benn Albrecht]

@Redgy Saint-Germain I'm currently in the process of a 203k loan and my mortgage officer said they would apply the left over balance to my mortgage balance as a principle payment, but the monthly payment would stay the same.

How much do you think you will have leftover ?

[Redgy Saint-Germain]

@Benn Albrecht Thanks for the quick response, I believe I should have 10k or more left over from the contingency funds.

Do you know whether its an automatic process or will I have to ask the lender to do so ?

Redgy

[Benn Albrecht]

@Redgy Saint-Germain Not sure. When you find more info post it here, I would like to know for myself haha

[Michael Cohen]

Hi all - any remaining funds from Reno loans go towards principal curtailment. You won't get the funds back as cash.

If it's a significant amount, talk to your lender about change orders. Maybe you can do something else.

[Redgy Saint-Germain]

@Michael Cohen Thanks for the info. I got confused a bit because the seller of the property had about 19k left in their escrow account at closing time from a 203k loan for the same property. They did not finish the work and I ended up buying the property with one APT half way done because according to them no contractor was willing to finish the work for nineteen thousand dollars. I may be wrong but I believe that money was returned to them on closing day.

Redgy

[Michael Cohen]

That's a different situation: the loan was not completed due to being unable to find a way to complete the work. If under normal circumstances, when the loan is complete, the remaining funds (typically just the 10%-15% contingency) go towards principal curtailment.  

[Redgy Saint-Germain]

That makes sense. Thanks for the clarification. 

Redgy

[Oscar Navarro]

I closed on a 203k last Friday. That same day (after the closing) I realized there are major misunderstandings between me and the contractor ($10,000 worth of misunderstandings). I want to switch contractor now. He has not started any work yet and is not owed any money. I contacted my lender and she said that unless the old contractor signs a release, I cannot switch contractors. My question has 2 parts. 1) is there a way to change the contractor without his release since he has done nothing to the house yet? 2) worse case scenario, I can use my own money to rehab the house. But what would happen to the $50K in escrow for the rehab? Can this money be returned towards the principal?

[Eloísa De todo un poco]

question ! If you have  leftover of $18.000

On the escrow, is going the full amount reversal to your principal or the bank keeps the mortgage payment ?