Post # 1
So my parents own a house that we are currently living in… it isn’t paid off, but they plan on signing it over to us. My dad said we should take a loan against the house knock it down and build a new one. I am not a big fan of the area we are living in and would rather sell it and look to buy a house in a different neighborhood.
Would it be easier to keep the house and knock it down or try to sell it? We dont have great credit so taht is one thing i am worried about. I have been looking at houses in the neighborhood i would like to live and they are almost double the house. Would it even be possible to get something we like?
The house we live in is very tiny maybe 700sq feet its a 2 bedroom but one bedroom doesn’t have a closet. There is no storage space anywhere it was built in 1902 so it is really really old! we plan on starting a family soon so i know we are going to need something bigger. Has anyone else been in this situation?
Post # 3
@MrsJVP: I haven’t been in your exact situation re: inheriting, but if you don’t like the neighborhood and the house won’t be big enough, you really should plan on a move. It would be different if you liked the neighborhood and wanted to stay – then by all means, give the rebuild option some consideration. But if it’s not WHERE you want, then it doesn’t matter if you build a dream home, you’re still not in the right place.
Side note – how very generous of your parents! Hopefully if your folks don’t mind the idea of you knocking down the house, they won’t mind the idea of you just selling it.
Post # 4
@sweetcrackers: They actually tried selling it about 7 yrs ago to get a condo for us… but since we needed to get out of the place we were in quick they didnt have a chance and wanted some income to help with the payment of the house. The only thing im worried about is the house isn’t paid off so I am going to have my mom check to see if it would be better if they kept the house in their name sold it then bought a new one and then give it to us or if they co-sign when we sell it and get a new one.
Post # 5
There are a lot of issues that go along with what your parents want you to do.
You will have to pay taxes on the value of the house if they sign it over to you, which could amount to tens of thousands of dollars.
You also cannot take out a loan on a house and then knock it down. The bank is using that house as collateral and if you destroy it, they no longer have that value as back-up, so to get a home equity loan, you need to guarantee that you will not alter the value of the property for the negative. If you can get a loan on the land, that may be an option, but these are very difficult loans to get and usually have high interest rates.
Also, for a construction loan, you need a 30% down payment. Most people don’t have the 20% recommended to BUY a house let alone 30% to BUILD, so that’s also something to consider.
For the sake of keeping your lives simple, I’d thank your parents for the offer of the house but turn it down. It probably comes with way more strings and headaches than you’re even aware of. Get something on your own that you can afford or rent until you’ve saved enough.
Post # 6
You need to also check into the construction codes where the house is located. Sometimes you can’t even knock them down and rebuild on anything other than the original foundation/footprint, making expansion for something else impossible.