Building a casita can transform your property into a more versatile and valuable space. Whether you’re looking to create a guest house, a home office, or a rental unit, financing a casita is the first crucial step toward making your backyard house a reality. Ash Creek Homes partners with Preferred Lenders who specialize in guiding you through the most common financing options available to fund your Creative Casita construction.

Understanding Casita Financing

Financing a casita, or a secondary structure that shares the same lot as your primary residence, can be complex. Our preferred lenders offer in-depth knowledge of the specific requirements and challenges involved in financing a casita. Their expertise can streamline your financing journey and help you find the best solution tailored to your needs.

Here are the primary financing options that our Preferred Lenders can help you navigate:

Home Equity Second Lien

A Home Equity Second Lien, commonly known as a second mortgage, allows you to borrow against the equity you’ve built up in your property. Equity is the difference between your property’s current market value and the outstanding balance on your existing mortgage(s). This type of loan provides a lump sum that you can use to fund your casita construction in stages, aligning with the various phases of the building process.

Key Features:

  • Separate from the First Mortgage: Your existing mortgage remains unchanged, and the second lien typically has its own terms and interest rate.
  • Higher Interest Rates: Since this is a secondary loan, it usually comes with a higher interest rate than your first mortgage.
  • Loan Cap and Value Consideration: These loans are generally capped at $250,000. The loan-to-value ratio (LTV) is typically around 80%, based on your property’s value before the casita’s construction.

Ideal For:

Homeowners who have significant equity in their property and prefer not to alter their existing mortgage terms.

Home Improvement Second Lien

A Home Improvement Second Lien is specifically designed to finance renovations or additions to your property, such as constructing a casita. This type of loan also uses your property’s equity as collateral but differs in how it assesses the loan amount.

Key Features:

  • Higher LTV Ratio: The LTV ratio for a home improvement loan is typically 90%, and it considers the value of your property after the construction of the casita. This can provide a larger loan amount compared to a regular second lien.
  • No Impact on the First Mortgage: Similar to the home equity second lien, this loan doesn’t affect the terms of your existing mortgage.
  • Higher Interest Rates: These loans often come with higher interest rates, reflecting their secondary nature.

Ideal For:

Homeowners who plan significant property enhancements and need a larger loan amount that reflects the post-construction value.

First Lien Cash-Out Loan

A First Lien Cash-Out Loan involves refinancing your existing mortgage into a new one with a higher principal amount. This new loan allows you to access the equity in your property, effectively providing the funds needed for your casita’s construction.

Key Features:

  • Replaces Existing Mortgage: This loan will refinance your current mortgage into a new one, potentially altering your interest rate and loan terms.
  • Access to Equity: You can convert a portion of your property’s equity into cash, which you can use for the casita project.
  • Loan-to-Value Ratio: The LTV ratio is usually around 80%, based on the pre-construction value of your property.

Ideal For:

Homeowners who are comfortable with refinancing their existing mortgage and possibly securing a lower interest rate or different loan terms that align with their financial goals.

Choosing the Right Option

Selecting the best financing option for your Creative Casita involves evaluating your financial situation, equity in your property, and long-term goals. Here’s a quick guide to help you decide:

  • Assess Your Equity: Determine your equity and how much you can leverage without compromising your financial stability.
  • Interest Rates and Loan Terms: Compare each option’s interest rates and terms to find the most cost-effective solution.
  • Loan Purpose and Amount: Consider the loan amount you need and whether the funds will cover the complete construction of your casita.

Partnering with Preferred Lenders

Building a Creative Casita is an investment that will expand your property and lifestyle. Once you have secured the right financing option, our construction team will be ready to begin a gorgeous casita that provides all the space you need and complements your primary residence. Call us at 512-328-2122 today to discuss the Creative Casita you’d like to build with our project manager.

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