Embarrassed about the numbers
I am actually still waiting on the appraisal (should know early next week). This is a quiet time to crunch numbers and prep for the closing on the loan.
I wanted to blog about bank loan numbers and how I made my decisions (in case it is helpful to others), but I am a little embarrassed about how much I plan to spend and about how the new house will be double the size of my current one.
We live well within our means. We buy used cars and my current one is 14 years old, we don’t own any fancy electronics (we don’t have an i-anything), my wife has a 3 year old laptop and a free flip phone with a minimal plan. My computer and cell phone actually belong to my work, etc. We do not try to “keep up with the Joneses.” On the other hand, I do have a good job with a good salary and regular bonuses. And the house needs to be large enough to have an office (because I work from home), school room (since we plan to home school) and room for visitors (since our guests come from far away and usually need to spend the night)…
Anyway, my solution is to pretend that I am going for a $100,000 loan so you can see the relative amounts without thinking too badly of me.
Here is the mortgage situation…
In the aftermath of the housing bubble, a lot of banks were severely burned. The first thing they stopped doing was making construction loans to crazy people who wanted to build earth sheltered homes, especially if they wanted to be their own GC. There may be a few more doing it now, but back when I was shopping in 2009, there was only one company willing to do it, GreenStone Farm Credit Services. They had not played the games and were in very good shape after the crash. We used them to buy our land and now we are just a few days from hearing back on the house appraisal to see if we will get our construction loan.
The Construction loan starts with a 4.25% variable interest rate. That is normally not something I would risk, but it is only for a year and it has been 4.25% for a very long time. I would get a line of credit and monthly payments would be interest only (no principle) on the money I already spent. In June of 2015, the loan would automatically convert over to a 30 year mortgage at a fixed rate without any additional closing fees (they are built into the upfront fees).
There are two problems.
1) Green Stone charges higher interest than anyone else I can find. At the time of writing, the average mortgage rate for a 30 year fixed, 0 point mortgage is 4.44%. Greenstone’s rate for the same mortgage would be 5.15% That makes a big difference in terms of your monthly payment and total interested paid. When I called them up and asked them why I should pay such a high rate for their loan, they said they offer better service (which is true), and that they wouldn’t be selling my loan to anyone else (which doesn’t bother me). They also mentioned the patronage program, which has paid about 0.5% back over the past few years, which made their rate half a percent better than it appeared. They didn’t say it, but I guess they know I am not going anywhere right now anyway.
2) The second problem is uncertainty because we don’t yet know what the interest rate will be 1 year from now when it kicks in. My insurance guy is pretty sure it will go up, but that is because he wants to sell me something called a “Rate Commitment Fee”. This fee is 0.75% of the total loan amount and would allow me to fix the rate where it currently is. We are talking thousands of dollars betting that the interest rate will go up… I had to crunch the numbers.
Using my fictitious $100,000 loan amount, the “Rate Commitment Fee” would be $750. So I looked at what the 30 year mortgage would be at the current 5.15%. I put in a column for monthly payment and one for total interest paid (if I paid for the 30 years).
Of course, I also ran tables for how much quicker it could be paid off if I tossed in an extra few bucks a month (I did a full table with a row for each additional amount). I totally plan to do that, so I hopefully wouldn’t get hit with the total interest numbers shown here… I also compared with the lower rate for the 15 year loan which would save even more money, but we decided that while that was doable now, it could make things more difficult if I lost my job (its not flexible enough)…
Then I considered what could go wrong… I created rows where I increased the interest rate to 5.5%, 6% and 6.6%. I looked at how that affected the monthly payment and the total interest paid. Then I calculated how long (in months) it would take me to pay off the “Rate Commitment Fee” as well as the total savings for each scenario… The chart looked like this (rough no formatting ;^)
So, what this is saying is that if I pay the 0.75% “Rate Commitment Fee” and the rate only goes up by less than half a percent, I would still end up better off in less than 3 years and I save a considerable amount of interest (nearly 10 times the fee) in the long run. If it goes up by almost a percent (which is the most that I really think is possible without a major world shift), the fee would be paid off in 14 months and I would save more than 20 times my investment in interest… In other words, if I think there is any chance that the interest rate will go up, the good bet is to pay the Rate Commitment fee…
So, is there a chance that the interest rate will go up? I don’t think so. Obama is working to raise the minimum wage. The natural effect of that would be inflation which would automatically lead to higher interest rates… But there is nothing natural about an election year. Obama and the Democratic party will be working hard this year to make sure that the Republicans don’t get to say, “I told you so.” about an inflation until after the election. Eventually, I expect the interest rate will go up based on market forces driven by a decent economy and increased minimum wage.
So, I do NOT plan to pay the Rate Commitment fee. But I will want to lock in to a fixed rate before the economic forces to kick in in 2016.
Hedge my bet?
After my construction loan is complete, I will have a normal mortgage on an existing house. There will be lots more banks that would be happy to talk to me. The “Rate Commitment Fee” is close to the amount I would spend on refinancing my mortgage if I decided to go with another bank… Other banks are more than 1/2 a percent lower than Green Stone. So…
If rates go up in a year, I can use the money I didn’t spend on the “Rate Commitment Fee” to pay closing costs to another bank to get a mortgage at a lower rate… Even if they don’t go up, I may still want to do that… I’ll do that math when the time comes.
Patience
According to my Gantt chart, Monday (24 hours from now) was supposed to be the first day of construction. Actually, we are still waiting on the “appraisal” portion of our construction loan. So far, every delay has really just been an opportunity for us to save up a little more money and learn a little bit more, so I have relaxed about it. I also see that the prime interest rate has been dropping all month. Since we are not in a panic about building, we can relax with family over next weekend’s Easter holiday (although I do still plan to talk to my uncle about what sort of MAG welder I should buy).
On the other hand… I don’t want to start too late. Winter is coming around again and I need to be closed in properly or the work will be interrupted and the scheduled and costs will increase.
When we dropped off the appraisal paperwork (over a week ago now), I left feeling like I was on the edge of a cliff. I would describe it as a cross between cold feet (pre-wedding jitters, which I did not actually experience with my own wedding) and that feeling people must get just before enlisting in the military. I was about to bet a lot of money on my self… On skills I am planning on developing… On an idea that I know is a little bit crazy. On something that will require a tremendous amount of effort. On a long term commitment. On a change in lifestyle. Pretty scary stuff.
Over the week, I have both calmed down and geared up. I am ready to go. We could hear news about the appraisal this week. I could get rolling the day after Easter. And that is why I am having trouble sleeping and I am typing this at 5:30 AM on Sunday morning.
Behind the Drywall Tour
Since we didn’t have anything major going on this weekend, I took a few hours with my wife and went on a “Behind the Drywall” tour. The company conducting the tours is known for making very high-quality energy-efficient homes, oftne using “Earth Tubes” and other interesting systems. The “Behind the Drywall” tours let you get a look at these systems before they get covered up. This particular home had a green roof with interior roof drains that lead to a complex system of “rain gardens” on the sloping site. It had geothermal heating with radiant floors, an ERV connected to carefully designed duct work, several different types of insulation and a belt-and-suspenders approach to water proofing. I was hoping for some extra inspiration, maybe a good idea or two, and at the very least, a nice walk with my wife before things got crazy (we left the kids with my mother-in-law, so they were happy too).
A previous tour featured specially designed plastic gel packs suspended between the wooden wall studs as a thermal mass (sounds expensive compared to concrete construction).
I was reminded how many little bits are needed to build a wood framed home (especially one with an interesting layout and some steel beams). So many little blocks were cut to make things fit and that made me feel better about my relatively simple build plan. Understanding everything I was seeing also made me feel more confident about my own build. Sherri also asked a couple great questions, so I know she is feeling pretty knowledgeable and confident also. Sherri pointed out that our home would be much more exciting and efficient and tour worthy…
Eye Candy
That’s enough for now, on to the eye candy.
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I wanted a pic of insulation for my insulation page… Michael wanted to jump in.
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Cool secret mirror door.
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Half door on the living room keeps kids out of the kitchen
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I liked the details of this arch. If your wall has some thickness, you may as well work with it.
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Spiral stairs down to somewhere interesting.
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Classic tree house… All builders used to be kids who wanted a cool tree house.
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Interesting earth sheltered home. I got it a while ago, so I forget all the details
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Very interesting building… We are moving away from cookie cutter?
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No plans to copy this, but it is eye candy
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This house was built by someone with a professional contractor. I have seen worse, I can do better.
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Poor woman has a hard job to do.
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Cool “Murphy Picnic table”
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I liked the lighting and the wood soffit. I plan to do likewise by my entry way…
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I thought this SteelArchHome was nice and modern looking… One step away from earth shelterd
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This was from a magazine article about how to dress difficult windows. I am sure the shutters were not cheap.
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Concrete and mosaic bench
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Concrete umbrella
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I liked this corner window a lot… I would like to do something similar.
So the year is over. It didn’t exactly go as I had hoped, but we are definitely in a better position to build next year than we were a year ago, more on that in my January kick off post. It is a bit frustrating as I put off doing other things because we expected to build, but such is life. This past month, I took things pretty easy. I only called one person for a quote (a very reasonable sounding plumber that I will bug again in January), and I put some time into building the home virtually.
Virtual construction is a way to run thru the process of building without the huge expense. I individually model each stud, track, buck and ICF piece and then assemble them as I would in the actual construction. Along the way, I am thinking about sequencing and other assembly problems. I try to build to the plan, but make notes when I need to make changes so things will fit. Of course, the computer could make things a bit too easy, for instance, I could just array my studs along and have perfect spacing. Instead, I tried to build things more manually by inserting and positioning each piece.
The below image shows the first steps of my basic construction plan.
I would start by pouring the footing, which includes a lot of precise layout, rebar, form work, etc. Actually, once that footing is done, I will be much more relaxed for the rest of it. I would then set the track (curved or straight) for my steel studs into the top of the footing with Tapcon screws. Then I would place wooden window and door bucks to guide the spacing of the studs. The Marinoware steel studs and steel frame jambs would be set (plumb) and screwed into the tracks. Flat straps are screwed to the outside of the studs to increase the rigidity of the assembly. Metal lath is screwed to the inside of the studs and track, partially to add rigidity, but mostly as a curved backing to catch and form the shotcrete.
- Basic construction detail
Along the way, I spent a lot of time figuring out steel stud placement. I am planning to use “balloon framing” so that load bearing walls will line up and I won’t need to spend as much time or money on laying the curved track. Since the steel studs will just be fancy integral formwork, I don’t need to follow strict structural guidelines. Instead of 2ft or less spacing, I can go a bit wider and not need to cut as many studs for windows, etc. I can vary the placement of the studs to line up with windows and doors across the various levels. For instance, there is an opening directly above the basement opening (shown above). If I shifted the main floor opening by a few inches, I could use one long steel frame jamb instead of needing to place two. I could also align the guest bathroom door with a mezzanine window buck and simplify the framework there also.
After all the steel studs, rebar and conduit are in place, with metal lath to keep things stiff and catch the shotcrete, we would shoot the basement walls 8 inches thick. Since the steel studs are 4 inches deep, this would leave 4 inches beyond the studs. The rebar, just outside of the steel studs, would be nearly in the middle of the wall.
Even though many of the steel studs go thru 3 floors (balloon framing), only the basement shotcrete would be applied in this phase. The top of this shotcrete wall would be cut/troweled roughly level six inches below the floor level. We may even be able to set the column base plates in before the shotcrete sets completely. We would then setup the steel columns and ring beam (I will need a crane of some sort) that will later support my concrete arches. I may do a little MiG welding to tack things in place at this stage.
This assembly looked fine at first, but I later discovered that the ring beam intersected the door buck by several inches. This was a mistake I had not caught earlier. I decided the best fix would be to notch the ribs… These thumbnails illustrate.
The floor system I have chosen uses ICFs (Insulated Concrete Forms) to support the concrete (instead of the wooden subfloor the architect/engineer specified, so yes, I will need to get this stamped by an engineer at some point, I was quoted $800 for that). These QuadDeck ICFs have light steel joists built-in to reduce the number of temporary supports needed. The ends will rest on the shotcrete walls with an inch or two of polystyrene overlap (roughly cut with a hotwire) and be tied in with bent rebar pieces.
This next image is a detail of the rebar (shotcrete and other details are not shown for clarity). Horizontal rebar is wire tied to the outside of the steel studs and should increase the stiffness of the formwork. I considered threading it thru the holes, but that would probably be quite a hassle. The vertical rebar is wired to the inside of the horizontal rebar, but with 8 inches of thickness, there is some flexibility here if needed. Rebar is placed before the shotcrete, and then some pieces are bent down into the ICF channels as needed. More can be added later and bent upward if necessary. I anticipate some issues in certain locations where the QuadDeck spacing clashes with the steel stud spacing, but it should be manageable. I also considered/modeled rebar placement between other ICF sections.
After the ICF forms are placed, they can be walked on. The electrician and plumber should appreciate how easy it is to set conduit and piping into the ICF decking. The ICFs are about 7 inches deep and we will be adding 5 inches of concrete on top of that, so there is plenty of room to work. We also plan to lay radiant flooring across the top of the ICFs. There are little plastic clips that screw into the polystyrene easily to support the radiant tubing. We will screw a form to side of the wall to contain the poor. It will only need to support 12 inches of concrete, so it shouldn’t be a problem.
Some of you may need a cross section vertical to understand the quad deck floor properly… Here it is. Basically, the ICFs form the “negative space” so that the concrete forms a nT (like a single or double-T, but continuous) beam across the spans. Where we meet a wall, the ICF is cut away so the concrete rests on the wall (tied in with rebar not shown here). On the left side of this example, I have cut away some of the ICF in order to create a concrete cross beam above the stairs to the basement. After the concrete is poured, the ICFs remain to provide insulation against heat and noise. They will ensure that my radiant heat goes up.
Now that there is a floor to walk on, additional studs, conduit, bucks, etc. are added in preparation for the main floor shotcrete. Since many studs penetrated from the floor below, this additional work is just incremental. I have not modeled it all yet, but it will include the fill walls under the ribs, the walls around the spiral stairs, etc. Once these walls are up, I will want to model the arches across the donut vault, the hop across the basement stairs, etc.
Here is a final look at how far I got during my Christmas break…
This process has been interesting so far and has resulted in a number of small changes. For instance, I noticed that the original plans placed the mezzanine windows such that the east one was right up against the east wall. When I built the 3D model, I placed the stud so that it would be at the surface of the 8 inch thick wall, but realized that one of the 12 inch thick ribs actually intersected the studs supporting the window. If I wanted to build the balloon wall before placing the ribs, I would need to move the stud by at least 4 inches to clear the rib. I also planned to put in a 14″ sun tunnel thru that corner to bring daylight to the guest bathroom, and that would also have passed in front of the window… So I decided to move all the mezz windows over by 16 inches. Since the steel studs were also framing main floor and basement doors, those would also need to move (to keep the steel stud layout simple). In the computer, this was much much easier to fix than it would have been if I had discovered the issue during the actual construction.
Similarly, I decided to lower the basement egress windows by 6 inches, I added a door way in the basement, etc.
