We are looking to add on to our existing home. We have gotten several bids already, and it's looking like it's going to be pretty expensive (6 figures), so I'm considering taking out some sort of loan. I'm not sure what the best option is, though. Is a cash out refinance what people typically go with, or a home equity loan? Any other options I should consider?

Weak answer? It depends.

You have to look at the total financing to make your best decision.

1. If your current loan is high enough
To refi and make sense then do one loan with cash out. Your max loan is 80% of value.

2. If your first loan is already low then keep it and stack a HELOC on top of it. 80% still applies.

3. If not enough equity stack a home improvement loan on top to get over 80%.

Take a little look further. Is the 6 figure expansion going to return? Meaning, if you're 6 figure cost is going to make you way overpriced for your market, is it worth it? If it's going to add value for resale over & above what you're going to spend, I'd refi & get as much as you can from your home now. Money is cheap, and maybe you can even have some to invest & improve your returns.

AustinAg2K said:

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We are looking to add on to our existing home. We have gotten several bids already, and it's looking like it's going to be pretty expensive (6 figures), so I'm considering taking out some sort of loan. I'm not sure what is bad credit the best option is, though. Is a cash out refinance what people typically go with, or a home equity loan? Any other options I should consider?

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Is it worth it to spend six figures if it means you'll be significantly overvalued in your market? I'd refinance and get as much as you can out of your property now if it's going to increase value for resale over and above what you're going to pay. Money is inexpensive, and you might be able to save some to invest and increase your profits.

If you have cash value in life insurance Bank of Texas or Amegy will loan against the policy (sole collateral) at around 3.5%.

No points no closing costs.

Frost Bank has a program, assuming good credit at 3.99% over 15

Take appraised value, add in 75% of the improvement cost and then they will loan up to 90% of that number

Say house is worth 500,000
100,000 addition cost
Total they will loan up to :is 575,000 times .90 = 517,500
If your regular mortgage has a 350,000 balance then you can borrow up to 167,500 using their program.

Really cheap closing costs, pretty quick and painless. Obviously need all the necessary architectural/engineering plans and proper permits.

If you plan to pay it off early this is the way as closing costs were a couple hundred bucks compared to a heloc or cash out refi