Construction loan - better to get CLEC or use full approved amoun

[David Matyas]

I purchased an existing commerical building for about $550k, and I am putting about another $500k into it. I will be occupying about 35% of it and the rest I will be renting out.

The bank originally assessed my building at $1m. I asked them is that I am doing things nicer then the original plan if they can re-assess and they said no.

They currently have about $375k more available to fund that I have been approved for. My costs are probably going to be about $500k (so $125k more then they approved for)

As of now, my money in the bank is not earning me more than 5.5% interest, so "lending" the money to myself (by self-funding) is actually earning me money.

So what is the better option:

1) Take it as needed and then have my construction loan convert into a regular mortgage

2) attempt to self-fund as much as possible and if I need the funds later take an equity line of credit because I will own most of the building

3) another option?

From my layman logic, I would think option 2 may be the best as that way I can pay back without penalties as I have funds available. But maybe that is much harder to get and the rate will be harder. Also, let's say I need more money then the bank will give me, is it easier for me to get it from another bank if I owe less on the original mortgage?

Thank you