My construction costs ballooned making permanent loan payment too high - Options?

Author: Rob K. Blake | Date: May 24, 2008 | Filed In: Mortgage Answers

The whole question,

“Hi, I have a construction loan and about to close on my fixed loan. The house went over my budget about 44,000.00. Now the estimated payment is to high. What options do i have?”

Construction Loan To Permanent Mortgage Options

First you could attempt to renegotiate the sales price and see if the builder is willing to lower the price. Unlikely I know but you have nothing to lose by asking.

You could ask the builder to put up the money for a 3-2-1 buydown on the mortgage if they are unwilling to lower the price. That could get you 36 months of lower payments without changing the sales price, mortgage amount or rate…for more read the glossary term ‘Temporary Buydown’.

You could change the loan type to an interest only mortgage for a lower payment. Not recommended, but you asked for options.

You could change the mortgage term to a 40-50 year term if you can find a lender who offers them. That would lower the payment too.

You could find the necessary cash to return the permanent loan to the affordable level putting more down. Available sources for cash are secured borrowing ie. 401K loan, other real estate loan, etc. , you could sell assets to raise the cash, or you could use gift funds from a family member.

One interesting way to raise cash that doesn’t cause another debt payment to form is asking parents with home equity to do a reverse mortgage and gift you your inheritance early. A reverse mortgage doesn’t have a payment for mom to worry about and actually at the same time she pulls your lump sum, she could set up a monthly installment to go to her to make use the equity while she’s living.

A few ideas…hope that helps!

Great question.

Good Luck!

Author: Rob K. Blake