Any other options for cash-out/construction loans?

Question

This is a new question, but somewhat related to my question: How do I apply for a mortgage after a cash closing on a property?

My situation: we paid cash for a house with the intent of adding onto it and completely gut rehabbing it. We basically need to borrow roughly 70% of what we paid for the house, and will be adding additional saving into the rehab process. The rehab will cost roughly the same amount as the home cost to buy. So, to use completely fake numbers, we bought a house for $100K, we want to put $100K of construction into it, and we want to borrow $70K to do so.

If we get a conventional mortgage (as a cash out), there is an occupancy clause that requires us to live in the house within 60 days of the closing. I have talked to two different mortgage brokers and two banks, and they all say this is a requirement of the loans they offer.

I have also talked to the two banks about construction/renovation loans. They both require that a plan be submitted by our contractor, and the loan money will be paid out as needed during the construction process. This certainly makes sense, and is in line with my research. However, it's going to take time to get plans together (permit, architects, bidding out the project to contractors, etc.) and then the closing takes 60 days. I am concerned that the whole project may be delayed while we are waiting for the closing and funds. This is currently the best option, and we will simply have to live with it if it's the only one.

My wife and I have excellent credit, we have other assets (401K/IRA) and we far exceed the income requirements for the loan we want to get. On top of that, we have the obvious equity in the house we paid cash for. I certainly understand that loan products are not tailor-made for each individual, but it's surprising to me that we can't find a way to get a loan based on our highly qualified (IMHO) financial profile.

So my question: can anyone shed any light on any OTHER options I might have? Do mortgages exist that don't have occupancy requirements? Do construction loans exist that don't require a plan up front? Are there other types of loans I might pursue?

Answer 1

For alternative financing, pursue a line of credit or a Home Equity Line of Credit.

(From the comments of ChrisInEdmonton and littleadv on the original question)

Answer 2

The other answer is what you likely want. But I will also add, with your excellent income, savings and credit you could probably apply for a personal loan rather than bothering to secure it on your home. This would likely result in higher rates but total flexibility on when and how you use the money.

If your main concern is that waiting to close the loan would delay your renovation plans you could consider taking out a smaller personal loan for the expected initial costs to begin work then get the construction loan secured on the house later to fund the rest of the work.