Nathan Colmer | The Van Dyk Group
C: 609.290.4293 | O: 609.492.1511
There are many types of mortgages and financing options available on Long Beach Island and it is important to understand the differences between them so as to not overpay in the LBI real estate market. Creative financing can play an important role in the construction process and can make the difference between a large and a small equity position in the finished home.
Please remember that I am a real estate agent and as such cannot give specific mortgage advice. The information I have provided is intended as a general overview of the options available to most consumers. It is best to contact a lender for specific terms and qualification information. I have provided the names and phone numbers of some of the lenders I commonly work with.
Building a new home on Long Beach Island can be one of the best investments you can make. Currently, there are some excellent opportunities to purchase a tear down or vacant piece of land and construct a new home. The target for such a project should be to have the project cost approximately 30% below current market value. In other words, if a construction project, meaning the purchase of the land and the cost of building the home, costs $1 million the new home should be worth approximately $1,300,000 in the LBI real estate market. One potential roadblock to building a new home on Long Beach Island has to do with financing. Construction loans operate under different guidelines which can make obtaining LBI real estate construction financing more difficult. Therefore, it is important to understand your options as well as the risks and benefits of building a new home.
Construction loans differ from a conventional loan in many ways. The terms and conditions of a construction loan will depend greatly on the individual applying for the loan and the institution offering the product but in general there are a few “standards” to go by. For example:
It is important to understand the ins and outs of Construction Loans on Long Beach Island New Jersey and therefore it is best to speak with a lender who offers this kind of specific product. Construction loans can be a very effective way to purchase a property on Long Beach Island and build a new home thus attaining positive equity almost immediately. Given their differences from a conventional loan, it is important to understand the terms and conditions as Construction Loans on Long Beach Island New Jersey are not for all buyers in all situations! There are other similar loan types (for example a Homestyle loan which is a renovation loan) that may be better fit depending on the needs of the individual.
A creative way to fund the construction of a new home in the LBI real estate market is to take money out of another property and pay "cash" for the LBI construction project. In this scenario, one would finance their primary home or another investment property through a cash out refinance loan. In doing so, the debt would be placed on their primary home or investment property and the buyer would have a lump sum of cash. This cash, combined with any saving or proposed down payment, would be used to buy the LBI house and/or fund the construction.
Alternatively, if the Long Beach Island house is lendable (as most are), the LBI home could be purchased with conventional financing and then the money from the cash out refinance would be used to fund the construction.
Generally speaking, this is the best method to follow as the interest rate may be lower and your offer will be stronger when negotiating the purchase of your house in the LBI real estate market.
With some homes having been damaged by Hurricane Sandy and being sold for land value. Luckily there are "lot loans" available that are used strictly for the purchase of vacant land in the LBI NJ real estate market. The key word here is "vacant" so there can be no building existing, damaged or undamaged, on the property.
After Hurricane Sandy, many homes in the LBI real estate market were being sold "As Is" with no repair being done on the house. Since a bank loans money on the house rather than the land, these storm damaged homes in the LBI real estate market do not qualify for traditional financing. Therefore, special loan products are required. The most popular of these is a Home-style Loan. These products are a hybrid of a conventional loan and a construction loan in that most will package the purchase price of the damaged house with the estimated cost of construction and loan 75% of this amount. Money is dispersed in draws as construction proceeds and when finished, the loan reverts to a conventional loan with no additional closing required. As is the case with all mortgages, terms and rates will vary depending on the mortgage company and the product.