Due to some recent changes in policy at the company I work for, my wife and I are in a position to settle down quicker than anticipated, and we have identified a lot that we would like to build a home on. The issue is that most of our net worth is tied up either in retirement accounts or company stock, and the company stock is currently in a blackout period until November, by which point I’m not sure if the lot we like will still be available.
Land is $100k and anticipated build cost is $500k-$600k, and while we have enough to cover a 20% down payment + reserves for a construction-to-permanent loan, most of this is inaccessible for another month, and our checking account only has $50k in it currently.
There is a local credit union that is offering a really good const-to-perm locked rate for both the construction (interest only payments) and 30 yr. fixed term at 2.625% for 20% down and 2.875% for anything less (down to a minimum of 5%) with very few other fees and closing costs. I’m actually a bit surprised because their terms are significantly better than other local lenders and anything I’ve read about online concerning construction lending, although they are well known around town and have good reviews, so I suppose they’re trustworthy.
It looks like we could do the 5% down no problem and save for a few months to eliminate PMI before construction is even finished, but the mortgage rate will permanently be a bit higher by 0.25%.
I’m wondering if it’s worth it to try to find a temporary loan of some sort to reach a 20% down payment. We would need to borrow $80k-$100k for about one month, and then I would use an RSU vesting event in November to pay for some of that (since there are no capital gains taxes if I sell immediately) and sell older investments + pay capital gains taxes to cover the remainder of the loan. But I have two concerns: 1) I don’t even know how to find a short term loan like that (if they exist or whether another loan would interfere with the financial check for the credit union loan), and 2) I’m not sure paying the capital gains taxes is even worth saving another 0.25% off of an already good mortgage rate. We likely would not be in this home for more than a decade at most, so is it really worth trying to squeeze out the lowest possible interest rate?
Another thought I had is maybe negotiating with the credit union to make a 5% down payment now and pay the remaining 15% in a few months in exchange for a rate somewhere in between, but I don’t know how amenable lenders are to ideas like that.
We’re also new to the process of building a home and are not quite sure what else is important to know that we might be missing.
Submitted September 27, 2021 at 06:05AM by gluon713 https://ift.tt/3ESqqfL
