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      11-22-2020, 10:29 PM   #3
chassis's Avatar

Drives: BMW G01 X3, M-B GLE350W4
Join Date: Mar 2019
Location: Indiana

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On the surface it seems to give you the funding source you describe and apparently wish to have. It sounds like a revolving line of credit, secured by your primary dwelling, with a conversion option to a 15 year term loan.

You are paying the bank a coupon of 3%, using a prime rate of 3.25%. They are buying a bond from you, backed by your real estate. A 3% bond is in the ballpark today. Moody's investment grade bond average is around 2.3%. High yield bonds are north of 4%. So the bank views you and your real estate as riskier than an investment grade corporation, but less risky than a high yield issuer.

Alternatively, are you in a position to fund construction of the barndominium out of liquid assets (cash or liquid securities)?

Last edited by chassis; 11-22-2020 at 10:36 PM..