Adding an Apartment to
A Single-Family Dwelling
Question: We bought a fixer upper six years ago in northern Virginia for $150,000 and have done many improvements so far. We now have a mortgage of $170,000 due to a refinance and paying off an equity loan. The property was assessed at $203,000 three years ago and now we would like to construct an outside staircase going up to the second floor and rent out the upper story as an apartment. The project will take approximately $10,000 for the stairs and kitchen. We already have a lease signed for $750 per month for the upstairs apartment when completed. Would it be possible to get a home-improvement loan for this purpose? This single-family house was built in 1954, has 5 bedrooms, 2 baths and is positioned in a cul-de-sac 11 miles outside Washington, D.C. Is it possible to get financing from the government?
Suzette: You should have no trouble getting financing. Rather than go through the hassle of a government insured loan (which can overwhelm you with paperwork), I suggest you simply get another home-equity mortgage. The funds can be used for almost any purpose, have flexible repayment schedules and are priced competitively. Typically you only need pay back the interest on the amount actually borrowed.
How the government can help with home-repair bills.
The only concern may be that these loans usually require that you maintain 20% equity in the property, which you did not have three years ago. However, home prices have advanced so dramatically in most parts of the country that this may not be a problem today. Consult with a local mortgage broker, or try the internet, www.eloan.com or www.mortgage.com, for example.
Mr. Irwin has more than 25 years' experience as a Los Angeles-area real-estate broker. He is the author of more than two dozen books about real estate and is recognized as one of the most knowledgeable writers in the real-estate field. Mr. Irwin's most recent book is "Buy Your First Home," (Dearborn, 2000).
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Suzette, Fairfax, Va.
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