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Hello Barndo Fam,
The more I read the posts out of the FB groups, the more I get a headache.
What comments are right.
What comments are wrong.
What comments are just plain filled with BS.
How are you supposed to know what advice to follow?
In my own personal building experiences, it always amazed me how I could get two completely opposing opinions when I asked a question.
Throw into the mix, that social media provides a format for just about anyone to provide their input or opinion, and KAPOW! You have a recipe for confusion and possibly even a big construction, financial or time-wasting mistake!
Our goal at Barndo Buzz is to highlight the most common questions encountered with planning, building and living in your barndominium, point out the PROs and CONs and guide you in the right direction to specialized professionals or resources so that you can draw YOUR OWN educated conclusion.
This way, you will know you are on your way to a legitimate source of info, saving you both time and money 😉
With all of this in mind, let’s take a look at the following post regarding financing a barndominium…
In just a few minutes, you’ll find out:
• Can your bank can freeze your construction loan
• What to ask about the construction loan in the first place
• How to avoid a lending headache
Can A Lender ‘Freeze’ The Cash In Your Barndo Construction Loan?
So this person was originally asking if they could refinance their construction loan while in the middle of building because their current lender had frozen their construction loan. (Yes, I said FROZE it!!)
Come to find out, what happened was that the lender was using a DRAW PROCESS that incorporates a PERCENTAGE OF COMPLETION method. Meaning that the lender has a FORM they use to determine the PERCENTAGE of your total building contract to calculate and disburse your loan from.
With this type of draw procedure, if you or your builder request more on your draw than the lender’s “formula” says you should have, you or your builder will not get your money, or at least only a portion of it. That is, at least until you have another line item that comes in UNDER THEIR BUDGETED PERCENTAGE, OR until the end of your construction project.
This can be a HUGE challenge for yourself or a builder when it comes to CASHFLOWING your project.
To avoid having this happen to you, ask your construction lender HOW draws will be disbursed and how it will impact the potential cash flow of your building project.
FOR OUR VIP MEMBERS, see a real bank PERCENTAGE OF COMPLETION SPREADSHEET, specific questions to ask your lender about the draw process and a SIMPLE HACK that could give you extra room in your construction loan and a cash flow cushion if needed…..
EXCLUSIVE VIP TIPS & TRICKS
Be specific when talking to your lender about how funds will be disbursed from your construction loan.
Will they use a percentage of completion process? Or apply a different methodology behind it?
Even ask them if they have a chart or schedule of draws that you can see.
Here is an example of what a percentage of draw completion schedule could look like:
Will they disburse funds in advance or will all draws be disbursed AFTER work is completed?
Will draws be impacted in any way by the sworn statement or lien waivers that you or your builder provide.
Once you know the answer to these questions you can determine if the bank’s lending practices will fit your needs.
SIMPLE HACK TO GIVE YOU EXTRA ROOM FOR CASHFLOW:
If you have enough cash on hand, you can always HOLD BACK a portion of your intended down payment and use this to help with CASH FLOW on your project.
For example, if you were planning to put down $60,000.00 on your loan, see if the bank will allow for a smaller down payment of $30,000.00, leaving you an additional $30,000.00 in liquid funds that can be used to pay for deposits, material or labor.
Once your project is complete, you should be able to pay down on the loan with any of your funds that you held back OR use funds from the construction loan that that were held back during construction as a percentage of completion that can now be applied to your loan.
As with so many other aspects of building your Barndo, the more informed questions you ask upfront, the better off you will be.
To Happy Barndo Living!
-The Barndo Buzz Crew
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