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203K Refinancing or Bridge Loan Funding or something else?

Hello,

I currently have a 203k loan that I had got in 2010, I used the mortgage to buy n renovate. Due to unavoidable circumstances the work stopped as the work is costing more than the initial contractor's estimate who eventually walked away from the job leaving me stranded. I need more funds than what was originally approved to get the work completed.

What are my options to get the financing n get the work completed.

1) Since the original loan was in 2010, property values have increased by 10-15% in my part of NJ. Think I can get a cash-out Refi using the After Repair Value of the house?

2) If refi doesn't work, can I avail some kind of Bridge loan and what might that cost me, as the After Repair Value of the house will be lower than 75% LTV of the total funding needed.

3) Any other option that I don't know of?
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November 17 2012 - US
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Answers (1)

Profile picture for Honesty Sells
Start with your contract agreement and contact your 203k consultant to see what choices you may have. The fast the better.

From Hud.gov -

1. Is there a time period on the rehabilitation construction period?

Yes, the Rehabilitation Loan Agreement contains three provisions concerning the timeliness of the work. The work must begin within 30 days of execution of the Agreement. The work must not cease prior to completion for more than 30 consecutive days. The work is to be completed within the time period shown in the Agreement (not to exceed six months); the lender should not allow a time period longer than that required to complete the work.

2. What happens if the borrower fails to perform under the terms of the Agreement?

The lender may refuse to make further releases from the Rehabilitation Escrow Account. The funds remaining in the account can be applied to reduce the mortgage principal. Also, the lender has the option to call the mortgage loan due and payable.

3. Does HUD always require a contingency reserve to cover unexpected cost increases?

Typically, yes. On properties older than 30 years and over $7,500 in rehabilitation costs, the cost estimate must include a contingency reserve. The reserve must be a minimum of ten (10) percent of the cost of rehabilitation; however, the contingency reserve may not exceed twenty (20) percent where major remodeling is contemplated. If utilities were not turned on for inspection, a minimum fifteen (15) percent is required. 
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November 18 2012
 
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