| Inspections and Draws |
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If your remodel project is small and you are self-financed (cash, consumer loan, or credit card) you won’t have a mortgage. With a mortgage often comes lender requirements such as inspections. If, for example, you have a $20,000 second mortgage to finance remodeling your bathroom, the lender probably will define specific points at which money will be paid to you, a supplier, and/or a contractor. The lender probably won’t put all $20,000 in your checking account and let you spend it on a new car. Its purpose is to increase the value or equity you have in your home. Remodeling Tips Need to find the best contractor in town? You can’t! He’s too busy to talk with you. However, busy contractors often will recommend other contractors that they know are qualified but not as busy. So start at the top when looking for a bathroom remodeling contractor. Inspections may be set for when all walls are framed, then once the plumbing and electrical systems are installed, and finally once the bathroom is finished and habitable. The lender may release chunks of money at each step, called draw requests. The challenge for you and/or your contractor is to make sure the draws cover the expenses to that point. If the plumbing draw is $4,000 and the plumbing contractor’s bill is $6,000, for example, someone (guess who) will need to come up with $2,000 to pay the contractor. If you’re working with a general contractor who is managing the project, she or he will coordinate the work and the draws. If you’re doing it yourself you’ll need to coordinate them. Remodeling Words A draw request is a monthly request by a contractor or do-it-yourself homeowner to be paid for the materials and labor installed into the project during the previous 30 days, to be drawn from the construction loan.
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