Buy a turnkey dream cabin or take a chance on a fixer-upper?
The question is a financial as well as an emotional one. In addition to the idiosyncrasies of a cabin and its location, banks will be interested in the appraised value after a remodel, says Tom Coronato, a construction loan specialist at Citizens Bank in New Jersey. That means doing your homework about what the cabin requires and what it will be worth in the end compared to nearby homes.
As you explore your options — whether you’re looking to buy a fixer-upper or a cabin that’s ready to go, or to buy land and build from scratch — it pays to find a lender familiar with the area.
“If someone finds a seasonal cabin, maybe one they currently own or want to buy, and they like the location, but maybe it needs an extra bedroom or they need to fix a central heating issue, we will do a combination purchase and construction loan,” says Tom Koerber, senior vice president of North- view Bank in Finlayson, Minn. “Say you buy it in June, you have contractors come in July, August and September to fix it up.”
An initial construction loan may be more expensive or will have an adjustable rate mortgage, but a final loan can be had once work is complete. Coronato suggests going to a local builders’ association, which can refer reputable builders who will give true estimates of what a cabin needs to be considered a three-season or four-season dwelling. That will help determine the financing required for the job and let the bank know how much the final product is worth.
“The ones that are tough are emotional,” he says. “Home buying is 90% emotional, but you have to take the emotion out of it to really get the facts. As a lender, how close can I get to the after-improved value, that future value that we can determine today?”