Finance question

[Greenbank]

Do any of you know whether my plan has merit?

We own a piece of property with a land loan against it. I had planned to build a modest cottage, as seen on this site, get a CO, and refinance the whole kit and kaboodle as a mortgage. This would allow us tax advantages, and if we wanted to, we could tap our considerable equity for future building projects.

I guess my question is...would a bank mortgage a property with a small cabin on it? It wouldn't be mircoscopic, and it would have al the usual amenities (power, water, a septic system, etc.). We wouldn't be looking for a big mortgage, either, just enough to pay off the land loan.

I know I need to ask a banker, but I thought I'd see if y'all had any thoughts.

[spinnm]

You need to ask a banker.  So much has changed the last 5 years or so.  New programs, much more flexibility.

Formerly it would depend upon the house:land ratio.  Banks didn't like to see the land at much over 1/3 of the whole package...maybe 35%.  So it would depend upon that.

Now?  don't know.  

[jraabe]

I would think that if you could build the cottage with your own financing and then wanted to refinance the whole property (land and buildings) that you would be in a good position.

Make sure you do the house to code and get a final inspection and occupancy permit.

Certainly, this cottage could be the future guest house if you someday planned a larger house as part of the compound. This is often done on rural land. In fact, such properties are very easy to sell as Realtors are always being asked for "land with a cabin".

[Greenbank]

Thank y'all for the insight. Shelley, I had forgotten about ratios, I think I need to do some comp work. I wouldn't be too shocked to learn that the property would be worth over 350 with a decent sized-cottage, or that it would be worth only 225.

John, your thoughts echo mine but I guess I'll call up the bank and find out!

[Bart_Cubbins]

"Money"  has an article online at http://money.cnn.com/2005/03/01/real_estate/buying_selling/secondhomes/index.htm
which makes it sound like getting mortgage financing for recreational property would be no problem...

"In the past, second- and third-homes required larger down payments and were financed with higher interest rates. Today, according to LendingTree president Anthony Hsieh, investment and vacation property is relatively easy to finance, assuming your credit is good and debt load within reason.

"Buyers have as much choice as they do buying their first home," he said."