@D Jones, I'll break it down. I got $108k out of the equity from our primary residence. That is 5.39% for 30 years. This cost $90 for an appraisal.
I got $92k from our rental as a line of credit. This is good for ten years. This cost $485. It just closed this last Friday so I was not sure on the closing amount when I posted earlier. Another awesome feature is that I only have to start paying on this loan when I actually pull the money out. Unlike the loan on our primary above, which I had to start paying on right away, whether I used it or not.
Right now we have a $100k loan on the rental. So after I finish the rental we will have a total of $300k in loans on the rental. That is the $108k equity pull out + the $92k line of credit + the $100k mortgage.
The rental hopefully at the time of completion will be worth between $500-600k. The last five houses on the same street have sold in that range, and this house will have the same number of bedrooms and bathrooms. It has a better view and will have nicer decks. The only thing it will not have is off street parking.
Even if I pulled $320k out to cover all the loans and the cost of the monthly payments on all of them during this year that I get it rehabbed, I will still be only pulling out 64% of the value at the new rehabbed value of $500k. 320/500=64%. I'd still have 34% equity at the low end of the valuation range, $500k. At the high end, $600k I'll have 47% equity left by taking out the $320k, 53%. $20k will go back into our account to pay us back for the monthly payments we made during this rehab time. I don't think it will actually be that much, but I don't know yet because the line of credit will vary as the months go by. As the balance I've taken out increases, the monthly payment will increase.
The pay offs for the line of credit, the equity loan, as well as the current mortgage will come from the new $300k loan. Then I will be left with one loan on the rental as well as an equity line of credit, and one loan on my primary residence.
Since my loan to value ratio will be on the low side, I'm thinking my interest rate will be better so that I can get a thirty year fixed rate and be done with this project entirely. It is hard to say what the interest rates will be in a year, but I'm hopeful it will be better than they are right now.
In addition, since neither of these loans have term limits that are six or twelve months long, I could continue to pay on all three loans and wait until the interest rates get better. This feature made this project doable since getting work done in this city is time consuming. I would have been a wreck trying to make sure the work got done in a short six months or even a year. I plan on getting it done in a year, but much of the work I am not going to do. I have to hire it out. Time frames are not mine to manage to a huge degree.
Taking the $320k out will allow me to pay off the $102K equity loan on my primary residence, and the current $100k mortgage on the rental, and the $92k line of credit on the rental.
An added benefit is that I will still have the $92K line of credit on the rental to use for another nine years as needed since I will have just paid it off. It is like a credit card, you use the balance and then pay off the balance and then you have the balance to use again! Genius!
This will give me the money for my next project, which I think will be our primary residence.
I am thinking of moving all our bank accounts to these two small banks since they really did take care of us. I've got both loans done and I'm still blown away that it worked out this way. I find myself logging on to make sure we really do have access to the money we need to finish this project. I'm forever grateful that I called and called and called all the small banks I could find in my area.
Please let me know if I have missed something.
