A special supplement to the Duluth News Tribune, Superior Telegram, Cloquet Pine Journal and the Lake County News-Chronicle DECEMBER 2018
New Build or Remodel
Tips for financing your 2019 home projects By Andrea Busche for the Duluth News Tribune
D
reaming of your brand-new home, or ways to spruce up your current home, is an enjoyable way to pass the time. Visions of smooth, marble countertops and tiled, walk-in showers can consume your every waking thought. While the dreaming phase is fun, eventually you’ll need to decide how to pay for it. And, unless you have piles of cash, this will likely involve a loan. When it comes to financing a home remodel or brand-new construction, your options depend on the project.
New construction
Annie Lepper, vice president of operations/ marketing for Minnesota Power Employees’ Credit Union (MPECU), explained that for a brand-new home, a construction loan is in order. “While the home is being built, you pay interest on the amounts you withdraw. When the home is completed, you convert it into a traditional mortgage,” she said. When building from scratch, you’ll also need to think about purchasing a plot of land. “If you are going to build ‘later’ (i.e. years down the road), you can get a lot/land loan and start paying it down,” Lepper said. “If you have it paid down entirely, most lenders will let you use this land as your 20 percent down on the construction loan, especially if you’ve put some cash into it (like building a pole barn or garage on your land) -- this demonstrates to a lender that you have some skin in the game.”
Renovations/remodeling
Down payments
When it comes to home renovations, financing options abound. “You can take out a home equity line of credit, using the equity in your home, and draw from it like a line of credit you can borrow from and pay down repeatedly,” Lepper said. “If you don’t have equity in your home, you can look for a specialized home improvement loan, which are increasingly harder to find. “Another option, if you have equity in a car or other collateral, is to take a loan against it to access cash for a renovation. And, some folks will do zero-percent credit cards for renovations,” she said, “But you want to be absolutely sure you pay it off before the interest rate kicks in. They often have retroactive interest, which can be very expensive.”
With any loan, a down payment is usually required. “With new construction,” Lepper said, “the lender will usually require 20 percent down on the land you’re buying, but it depends on the lender. “With home equities, there won’t be a down payment, but you may have to pay a few hundred dollars in closing costs for an appraisal, title work, etc. Other financing options usually don’t require a down payment.” FINANCING: Page 4
Interest rates Your interest rate will have a big effect on your monthly payment. “A home equity line will usually run you between 5 and 9 percent Annual Percentage Rate (APR), and can adjust annually,” Lepper said. “Construction loans usually hover around 5-6 percent APR, and car loans can range from 3-15+ percent depending on your credit.”
Jennifer Saari, loan officer with MPECU, discusses financing with a customer.
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TABLE OF CONTENTS: • Plan your landscaping projects now • Lumber choices for exterior, interior uses • Interior design: Tips and trends for 2019 • How to choose the right window treatments • Caring for kitchen countertops And more! 001809574r1