Basements, Attics and Crawl Spaces - Adding a basement apartment and need help with value appreciation

Hello out there. I have been looking all over for help and thought I would try here. Here is my situation...

My husband and I are turning our used-to-be-disgusting unfinished basement into a full sized apartment, with full beautiful bathroom (even bigger than the one on the main floor), full sized kitchen, dining space, living space, huge bedroom, and office. We replaced the one crappy entrance with french doors, and added another entrance with french doors out from the bedroom. We are planning on putting a wrap-around porch on the outside, and hardwood flooring throughout (tile in the bathroom). We had to gut the entire basement and put in all new electrical, plumbing, pretty much an entire remodel.

The basement is the entire footprint of the house (I think around 1400 square feet). The house with 1 acre was appraised at $350000 last December 2008 before we started everything, and home values in my town have actually gone up average $24000 since then.

When we are finished, we want to refinance so we can pay off credit card debt. Anyone have any idea how much I could expect the value to be at afterwards? Thanks in advance for any help you can offer.

Have the county assessment office come over and appraise your property at the proper rate and have it added to your tax card.

That way if you were to sell, you can prove that your house is worth this amount - due to the amount that the county charges you in taxes.

At the same time, have the bank come in and look at the situation and assess what they think that you home might be worth.

If you think that by adding value to your home that you can pay off credit cards with one type of loan in place of another, in the long run you will probably just dig yourself into a deeper hole because most times as soon as people gets more credit, they run right out and spend more money and put themselves deeper in debt then what they already were.

If you think that by refinancing your home, you can get a better rate and by paying the same amount per a month, and paying off the credit cards and destroying those cards and refusing to ever own credit cards ever again, you might be able to bail yourself out - but you might end up living in the basement you just built and renting out the house you presently own - just to make ends meet.

You mentioned it so I have to mention it, too. I agree with claw hammer. "flipping" your basement to make money to pay off credit cards seems a dubious proposition. Presumably you're hoping to, for example, spend $15k in materials and invest your time into an increase in property value of $30k for net "gain" of $15k. For what it's worth, the days of 100% loan to value with 20% of that being a HELOC to spend on whatever you like are behind us.

Whoah, that went in the way different direction than I intended it too. Maybe I should tell you what my motivations really were.

I'm actually not really that deep into debt. I only use 18% of household income on debt (including mortgage), so I don't really have to refinance. I just really hate the rates on those stupid cards going up and would rather just consolidate and maybe keep one or two for gas fillings.

We are planning on renting it for some extra income, and I eventually want to have children and hopefully be a stay-at-home mom. I'm not one of those people who bought a house as an investment, but want to stay in it forever and pass it to my children.

I just wanted to have an opinion on whether I should even bother trying to refinance, or just take the rent to pay down those credit card balances instead.

I realize the state of the economy now swayed you to react the way you guys did, since so many people are drowning...I think after the basement's finished I might try to refinance just for the sheer curiosity to see if it's even possible...lol

Hi gal,
It doesn't cost a lot to get an appraisal. just use an appraiser who qualifies with your bank so the appraisal can be used if you choose to go for some extra money. Nothing wrong with using your equity in your home to pay off those cc crooks. The last statement on my line of credit showed a 3.25% interest rate should I need the money.

Generally any equity between your current balance and 80% of your new appraisal should be available, that's assuming your current balance is below the 80% mark :). Skoorb is correct that banks are shy about going to 100%.

The other posts were a bit tough on you, but I think they meant well as all too often we overextend ourselves. But your thinking about creating an extra income with the rental is a good one, especially if you can find good tenants.

Go for an appraisal that the banks will accept and you should be all set. And welcome to the forum.

Bud

If she is only using 18% of her income, why not just pay off the credit cards with your own money and then stop using them.

The savings then in interest would be 100% and not 3 or 4%

For people who doesn't understand how credit cards works, I have a very simple explanation.

A credit card is a piece of plastic that grants the person holding the card the luxury of being able to write themselves a small loan - up to what ever the card is worth in credit.

Once you write yourself the small loan for what ever reason, it is your responsibility to pay back the money or make what ever payment per a month that you feel that you can afford to pay.

Keeping in mind that sooner or later you will get in deeper then you can afford and then you will owe them more money then what you originally borrowed and will have to keep making payments long after the item that you had to have today - is no working or is no longer owned by you.

A hot dog or a hamburger is a good example. You go to a store and you are hungry and you charge your lunch. The bill for your lunch came to say $10. A month from now if you paid the $10 and there was no fee, you actually got $10 of goods or services for $10
If you could not pay the $10 - because you charged your lunch every day and now the bill is $310 + 3 % interest. Your $10 hot dog lunch now cost you $13

You can't take back the hot dog because you already ate it, but you still owe the money. So the best thing for you to do is to brown bag it - even though it might make you look poor, and save the $9 that the store charged you above and beyond what it cost to pack your own lunch, plus you saved the $3 interest - because you never had the $10 to pay for your lunch in the first place.

Get rid of the credit cards and get rid of the house payment and save your money and only buy with cash in hand and in time you will be driving a new car and can afford to buy lunch anytime you please.

The last statement on my line of credit showed a 3.25% interest rate should I need the money.Mine is about there, too. These are floating values, though; it was about 2.5X that just a couple of years ago and could be again (or worse).

You could ask your local building inspector at the townhall based on his experience of remodeled homes over which he presides what the typical increase in home appraisal has been--just a very loose ballpark.