Posted by John Behle on January 22, 1999 at 16:15:57:
Paper is paper. The only difference with Home Improvement Paper can be the fluctuating Loan to Value ratio.
NEVER lend on the “when finished” value. You loan based on the current LTV ratios and then can extend more money as the property improves - like a construction loan.
You can use “multi-staged funding” on home improvement loans or any other loan where you need to temporarily minimize the risk. Staged funding should be contingent. If the improvements are note made, the funds are not extended - no matter what the scheduled time period might have been.
A staged funding scenario requires your monitoring of the situation and an on-going due-diligence. Another, less complicated option can be to just get the borrower to put up different or more collateral (“Collateral Conversion”)