Especially as a first-time homebuyer, it is rather rare and simply not expected for you to possess enough funds to pay for this real estate purchase in full. With this, you may have to secure a loan with financing options that work best for you and your current financial status. But on top of this, the property that you have purchased may need to undergo some serious renovations and reconstruction projects to make it modern and more importantly livable. This may require you to get approved for additional financing for your proposed project. Well, for this, please continue reading to learn the most common challenges when obtaining financing for a residential real estate project and how an experienced New York City purchase financing attorney at Zimmet Law Group, P.C. can help you avoid them at all costs.
What are the most common challenges in financing residential real estate projects?
When debating applying for financing for a residential real estate project, the first thing you should think about is whether you can afford it in the long term with its set interest rate. As an example, in 2024, the current interest rates in New York State are 6.76 percent for a 30-year fixed mortgage and 6.17 percent for a 15-year fixed mortgage. This is at an unprecedented high compared to past years and decades.
It is also worth mentioning that, if you have what is considered a poor credit history, potential lenders may spike up the interest rates on their offered loans. Overall, you must consider whether this imposed interest rate is worth it, based on how much this project will potentially boost this property’s return on investment. And with the real estate’s market reputation for volatility, especially in these most recent years, it may be difficult to clearly deduce how much this renovation or reconstruction will have your property valued at.
What are the challenges in refinancing my original loan agreement?
Once your renovations or reconstruction projects are well underway or practically complete, you may realize that you stepped out of budget here and there. Ultimately, this may have you seriously considering petitioning to refinance your original mortgage loan. An advantage to this is that you may take advantage of lower interest rates, should they ever drop below the six percent range again. Or, contrastingly, you may convert your adjustable-rate mortgage to a fixed-rate mortgage, should interest rates continue to increase.
But one common challenge to this is that refinancing comes with significant closing costs (i.e., appraisal fees, credit check fees, title search charges, insurance charges, etc). These costs may defeat the point of refinancing for affordability, especially if you do not plan to live in this home long enough to recoup them in time. This is not to mention what refinancing does to your credit score.
There is no need to remain hesitant when you have a skilled New York City residential lending attorney on your side and supporting you. So please inquire with us at Zimmet Law Group, P.C. at your earliest possible opportunity.
