Posted by: Scott McCullough | August 3, 2011

Slight Change of Plan

Originally Jess and I were hoping to begin construction this summer and to continue construction through the winter, hoping to be done by the summer of 2012.  If money were no object we would already have been underway.  But it is, so for us this is going to be the biggest financial commitment we’ve ever made, and we don’t intend to rush into anything just for the sake of getting it done.  The reality hit us a few weeks ago when we reviewed all the numbers in more detail on the spreadsheet we created.  On a number of line items we underestimated the real cost of things, and came to the conclusion that the bottom line wasn’t where we would like it to be. 

On top of that the numbers of the construction loan that we were applying for made us think again about how much we were spending.  Although we were looking at a good interest rate of 4.75, the amount of money that we actually pay out through the full term of the loan was staggering.  Our construction loan was in the ballpark of $255,000, and the total amount that we would end up paying was around $405,000.  We both knew that this is how mortgages work, but to see it in print on official documents was different.  Fortunately we hadn’t gone far enough into the construction loan process where we couldn’t back out without any consequences.

So we will begin construction within the next few weeks, but will stop after the foundation and first floor deck are complete.  We will be able to do this without the help of a bank, therefore avoiding the interest cost for this portion of the work.  During the winter we will look closer at the design and make some alterations to help bring the cost of the project down.  When the snow recedes in the spring we’ll continue the project under a construction loan.

Although it is a little frustrating to be slowed down like this, it’s the safer way to go.  Committing to a construction loan at this point that is out of our comfort range could easily be regrettable.

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