The Ins-and-Outs of Financing an In-law Apartment

Thu, 18 Jul 2019

By Alison Gibbons, VP, Producing Sales Supervisor

Are the folks moving in? Perhaps they’re coming to help with the kids. Perhaps they’re nearing the point where they require more care. (That’s the case for 26 percent of all people buying multigenerational homes. ) It can be a cost-efficient solution. But either way, your house may need renovations to give all of you some much-needed privacy.

Clients today are putting in in-law apartments, accessory units, basement remodels and universal bathroom designs.

With rates still at historical lows, accommodating homes for multi-generational living is a trend on the rise and it isn’t likely to decline in the near future. While you have a range of financing options, here are two increasingly popular choices:

1. A Construction-to-Permanent Mortgage Loan

You can use a fixed-rate Construction loan which turns into a mortgage once you’ve completed construction. They’re offered for 15- or 30-year terms, whether you need a conforming loan (up to $484,350) or a jumbo loan (greater than $484,350). The fixed rate gives you a steady, predictable amount to budget monthly.

You can also opt for an adjustable rate on a 30-year loan, which gives you the potential to save should rates drop.

2. A Webster exclusive: The Construction Second loan

If your plans require more than $100,000, consider the Webster Construction Second loan. It lets you borrow against the improved value of your home, even before you begin renovations. It combines a construction loan with an equity line of credit, letting you borrow up to 80 percent of the improved value your home will have.

You get the funds you need before the contractor begins work—and the contractor only gets paid as the phases of the project are completed, inspected and approved.

What’s more, you pay interest only on the amount drawn during the construction phase. Once construction is completed, the loan will automatically turn into a fully amortized fixed rate for a 15, 25 or 30-year term.

Note that homeowners are to obtain proper permitting and local zoning approval prior to work being done. And all phases of your project are to be completed by a State licensed and insured contractor.

See how we’ve helped clients in your situation.

At this important life transition, bring your questions and goals to Webster. Talk with a specialist who’s helped others address the challenges and opportunities that come with multigenerational living—a local advisor who can assist you in making confident decisions so you can move forward faster.

The opinions and views in this blog post are those of the authors, and are not intended to provide specific advice or recommendations for any individual. All loans are subject to the normal credit approval process.
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