Subscribe
Share
Share
Embed
Welcome to Let’s Build with Armada, the podcast where Washington homeowners learn how to remodel with clarity, strategy, and confidence—on a schedule that follows real projects, not a rigid calendar.
I’m Charlie Carter from Armada Design & Build. After years of working across the greater Seattle area, I’ve learned that successful remodeling isn’t about luck. It’s about planning, transparent conversations, and understanding how every decision—from windows to insurance to material selections—affects long-term value.
In each episode, I sit down with experts to answer the questions homeowners genuinely care about:
- Why your PNW windows cry every winter
- Financing options that actually make sense in 2026
- How to not get burned by a cheap insurance quote
- What adds value in Seattle… and what just burns cash
- How to plan a DADU without turning your backyard into a 2-year construction zone
Whether you’re preparing for a kitchen or bathroom remodel, planning a full-home upgrade, or exploring a backyard DADU for equity or rental income, this podcast gives you the clarity you need to move forward confidently.
Listen here, watch more real projects on our YouTube channel, and visit us when you’re ready to build with confidence.
And don’t forget to follow the show—so you never miss an episode that could save you time, money, and stress.
Visit the Armada Design Center in Bellevue when you’re ready to start planning your own home transformation!
📍 15600 NE 8th St. Suite O2, Bellevue, WA 98008
📞 425-587-8286
🌐 https://armadabuild.com/?utm_source=transistor
So you can save yourself tremendous amount of money. You don't want to use or spend the money on payments before you even spent the money on the project. So that sounds like a headache. It's scary when I see a file with more than maybe two subcontractors. Right. Right. Right. ADUs, DADUs. It's a lot easier than you think. It's a lot more affordable than you think. I agree. And the options are many. They make money. They got jobs. These are good. They just don't know. It's easier for me to tell you what we won't finance. I'm so glad that we found Megan. I found Megan. An appraisal is nothing more than an opinion of value. And people can have different opinions and sometimes they get a little like, we're just paying cash. And I'm like, are you sure that's the best move? No draws, no inspections. We are not going to drive you crazy for months and months on end. Make sure you do this or don't do this or be sure of this. What would that be?
I am Charlie with Armada Design and Build and this is Let's Build with Armada. This is our podcast. This is the first time we've ever really done a little run of these, so bear with us. We're new. Um, this has been exciting though. We've been having a lot of fun. And we have a guest that I am super excited to have in today to talk with you, learn. Uh, this is Megan Safara, right? Am I saying that right? Okay. Cuz I've always just read it and never had to say it, I don't think. So Megan Safara, she is a mortgage broker lender with Renoi.com, which is a Philadelphiabased company, but Megan is Washingtonbased, lives in the southern part of the state, and you're licensed broker through them. Everyone's got to be licensed in the state right now. You're licensed in multiple states, right? Yes, I'm in seven states. Seven states. Okay. Overachiever. All right. Clearly. So, uh, licensed in seven states to help people with mortgages, but you're based here. You work with Renoi, and we send people to you, and you help them get loans. That's right. Essentially, that's it. If you want more, we'll have stuff in the show notes and the links in the description to find Megan and Renofi, her website, and all that kind of stuff. You can get to her. Um, on your way in, click like and subscribe and turn on the notification bell. share with your friends that need to do and know things about homes and owning homes and living in them and being a homeowner. So, welcome. Thank you very much. All right, Megan, what is the number one thing that you as a mortgage professional, somewhat experienced, been around a minute, right? I don't want to say you're old or anything like that, but you're not new. This isn't your first week on the job. What would be the thing that you say that you are consistently surprised by or reminded of or see out there in the world that homeowners make as that most common mistake or the thing that they miss from a mortgage standpoint or the biggest misconception? Something that you could correct right out of the gate and say like 80% of the people think this or do this or miss this. What would that be? I think it's the planning. A lot of it comes down to proper planning. And just like when you go to buy a home, it'd be very similar. You wouldn't want to make an offer without having a pre-approval in place, right? Same thing when you do a renovation, you should be exploring all options upfront. I I think that people don't realize that it's not as difficult as they think to do a renovation loan. And that the options they might have heard about in the marketplace are not necessarily the only option out there. For instance, this is not a construction loan that we do. Mhm. It is. We call it the anti-construction construction law actually. All right. Less difficult uh than you think. Okay. So, don't be intimidated. It's a little bit easier from a renovation standpoint to get funding. Yes. And I think that with the proper planning and, you know, talking to a professional like myself up front, they will realize that quickly and feel very comfortable going into contract and um planning the renovation from there. Right. Exactly. And that and that's one of the reasons that I'm so glad that we found Megan. I found Megan. So, um I'm very glad that we found her and that we're able to connect her with our clients uh for them to, you know, get some money. We're not getting anything out of it. We're not hooked. We're just like, "Hey, here's Megan. We know her. She's helped a lot of clients. You talk to her, you do her. You guys do your thing together and then, you know, hopefully there's then we can go build the project, right?" So, that's that's the thing. Um and she is really great and I like putting you with people early, right? You know, to figure out. So, like it's one of the things we had a podcast, we did one with Ryan, one of our our real estate people here that we were in and and the very first thing he said you got to do is get preapproved. At least get a sense of it. So, like have some sense of what it is that you want to invest. Now, that could be a combination of borrowed funds and cash, right, that you can put together. Like, you don't have to borrow all of it and you don't have to pay cash for all of it. And in fact, there might be some incentive or reason to borrow versus paying cash. Yes, exactly. In fact, even if you have the cash, I often encourage people to open up that line of credit. Our renovation loans are a home equity line of credit, which I know we will get to the specifics, but you don't have to use it if you don't want to. You only pay interest on what you do use. We will lend, you know, based on your future value, but if you just have that cushion there, there's unforeseen expenses. There can be a change order that goes into place. Um, so you want to have that protection. Yep. I get it. So, all right. So, then let's start at a really high level because I and I I mean I have a I have a pretty decent I think sort of nonmortgage professionals understanding and grasp on residential lending more than a a lot of people. So, I don't I'm not a very good comparison. But what I do see when I'm out talking to people about projects is I do find a surprising amount or of lack of information, you know, or lack of data. And and really, it's almost ignorance. I don't want to say they're not dumb. These are not dumb people. These are they make money. They got jobs. These are good. They just don't know, right? And it's not that they can't figure it out or they can't learn it. It's not beyond them. It's just nothing that has ever been really well explained or they've never really been exposed to it. they don't really get it right. So at a very high level, let's run through kind of if you can for me a a very high level overview of you know home lending borrowing stuff at like so you got your purchase, right? So kind of start there, purchase basics and then a little bit exotic kind of how that goes and then more complicated. We can then sort of wind our way get into a little bit the more specialty stuff of helping to borrow and fund a renovation or addition or that kind of thing. Right. So kind of give me that 50,000 foot view if you can. Yeah. So when you buy the house, you're going to have a first mortgage, right? Uh typically most people go into a 30-year fix these days. Some people choose an adjustable rate, but you will have your first mortgage and it will be a percentage of what you put of your home price you paid, right? Say you put down 20%. Um, you would then have that first mortgage and maybe in a year or two you might want to borrow some money to improve the house. You would then consider options such as an equity line or an equity loan. And I I'm going to go ahead and just uh state the differences between those. Sure, please. Um, and you'll hear me use the term HELOC and HELON, which will are used interchangeably. And HELOC stands for home equity line of credit. Yes, it is a revolving line of credit. And you'll hear me use HELOC and sometimes HELOC, sometimes home equity line. They're the same thing. The HELO loan is just like it sounds. It's a home equity loan on a fixed term with a fixed rate and a fixed payment. So maybe a 20-year fixed or 30. Mhm. Okay. So let's give a quick example then. So and when we were just talking with Ryan real estate and he was saying that the average value in Belleview, right? I think he said Belleview current value of a home in 20 in 2000 it was 390 390,000 round it up to 400 and today right now it's 1.4 1.5 million almost four times the money right so let's say you're buying that average home okay which is $1.4 $4 million and you're going to put 20% down, which is $280,000 of your down payment or more, right? And so that would be your down payment and then your mortgage would be for the amount you didn't pay and then your equity would be in essence in the part that you did pay, right? So two years from now, say your house goes from 1.4 million what you paid for it and it's worth 1.5 million. Mh. It's grown in value, but you still put down that $250,000. Now, your equity has grown, right? So, you now have a bigger pile of equity. Your net worth in essence increased because that went up and you're paying your loan down in theory. So, when you talk about a home equity line of credit or home equity loan, what you're doing is you're going in and you're accessing the difference between what you put down and what it's worth. Getting into that money is where that's coming from. So your first mortgage is in first lean position on your title. So it's, you know, your home is collateral for a mortgage. The that the first mortgage lender has first right to the property should you stop paying, right? And that's that's why it's called the first mortgage, right? Because they're in first position. It's first priority, right? So if it goes sideways, bankruptcy, whatever, they're the first people that get paid. Yes. It's how that works. And so a second mortgage, a heliloc or a helilo would be a second mortgage. Both of them are in second lean position. That's all second mortgage means. So when you say HELOC, it's still a second mortgage. So if everything goes sideways and you walk away from the house for the first mortgage people get paid first and then if there's money left over, the second mortgage people get paid. That's so second mortgages are a riskier position for a lender to lend on because if the value goes down, you know, there's sometimes a down market. Um the lender might be on the hook there. So um generally speaking, lenders do not like to lend you all your equity. So, if your home is now worth 1.5 million, they're not going to let you have combined mortgages up to 1.5 million. Typically, a home equity line or home equity loan will cap you anywhere between 80 and 90% depending on the on the lender, right? And if you go even if you go up to 90%, you're still pretty capped. I mean, you're we're going off of the ASIS value. And don't think that a lender is going to give you an overly aggressive appraisal, right? So, yeah. So, I mean, if the market value is 1.5, you know, on a good day, they might say it's worth 1.35 or something like that south of that to protect themselves and then say, "We're only going to give you 80 or 90% of that number." Well, it's not that that the lender's appraising the house. We have third party appraisal. I don't I don't mean the lender, but the appraiser being conservative. Exactly. An appraisal is nothing more than an opinion of value, and people can have different opinions. So, yeah, like I was talking with Ryan in the in the in the the earlier podcast we did um before this morning was that something's worth what someone's willing to pay for it. Sometimes it's in the eye of the holder. Yeah. Exactly. I mean, like, oh, a house is worth a million dollars. And someone walks in and pays you 1.5. It's worth the 1.5 to them. To them, right? Okay. All right. So, you've got first position, standard mortgage, 30-year fixed rate is the most sort of plain jane vanilla that you could do. 30-year fixed rate, 20% at least down mortgage, right? That's the baseline. And then it can start to vary from there. You can shorten the term. You can't make it longer, I don't think. Can you? I think they just uh were talking about a 50-year. Did I see that? Yeah. Okay. Standard 30. You could go 15, you could go 20, shorten the term, payment goes up, right? But your overall interest would be less. Um, and then interest rates can fluctuate whether it's a 15 or 30 year. That's things move in the market, right? Sometimes it's a better deal for one than the other. It's not always the same. True. Sure. I mean, once you're in your fixed rate, your rate is fixed, but the market's always moving. But I mean, if you're comparing Oh, sure. Well, if I want a 15-year or a 30-year, sometimes the interest rates for those will sometimes the 30-year is more expensive and sometimes the 15 is more expensive, right? They there are various things in the market that um will affect affect that, but yeah, the spread can change. Okay? So, it's not always the same. So, then you've got your conventional, you've got your 20% down, then you get into exotic stuff where you have higher LTV, right? Where you've borrowed more, right, kind of thing or higher payments and that kind of thing. Then you're getting into the second mortgage helock world, right? We talked about a heliloc, home equity line of credit and a heloan, right? So home equity line of credit. Step me in here if I'm saying this wrong. At any point, please. It's like, so back to the scenario, you've got something that's that you paid a million or you paid 1.4 million for it and you put 400,000 down. You have a million dollar first mortgage. You have $400,000 worth of equity. And then someone like Renoi will say, "We will give you a home equity line of credit for $100,000." And they essentially give you access to $100,000, like a revolving credit, and you can write a check, something like that, right? Use that money. And then next month, you're going to get a bill for the interest on the amount that you sent out. Right? That's your minimum payment. Is that how that works? Most of our home equity lines have a minimum payment of interest only, but then you can pay any amount more. Yes. Right. And that's an equity line of credit. And then if in two months you pay all that off and you have no balance, then the following month you have no bill, right? You only pay when you have money borrowed. Now with the HEL loan, they're going to say, "We're going to give you that same $100,000, but here's all the money, and then there's a fixed term and repayment process that starts right away. You pay this much every month for this long." Yes. Kind of thing. Whereas the HELOC gives you no payment, big pay, you know, whatever kind of thing. The flexibility. Yes. Now, is the interest rate different between the two? Like, is one a variable and one a fixed or can you get both or how does that work? The home equity lines are all tied to the prime index, which is uh it moves when the Fed moves the federal funds rate. So, when you hear the the announcement that the Fed just reduced rates a quarter point, you can expect your home equity line rate to go down that next month on your statement. Okay? It will fluctuate. I would not be scared of the prime index. If you look up the history of it, it's, you know, we we were just at a height and we had some recent um uh rate cuts which has helped a lot. And Ra just from a time standpoint, we're nearing Thanksgiving in 2025, right? So this is, you know, mid November 2025, we're talking about timeline wise. So So it just went down a little bit and then things reflected. Yes. So when you have a home equity line, you will notice on your statement your minimum payments if you just kept a consistent balance. and say you borrowed that 100k and you never paid any principal. You're just paying the minimum payment of interest only so to speak. You Yeah. You would see your payment fluctuate when that rate shifted. Go. Now, what about people nervous about a variable rate? Okay. What happens if rates go up? Now, obviously, we hope that's not the case and they're kind of high at the moment compared to where they've been for a long, long time. So, what happens? What's my risk as a homeowner borrower with a variable rate loan thinking about it going up? Uh so going back to this index, it's only going to it's only going to shift when the Fed moves that federal funds rate, which is not every day. It also never in the history, I think, is it ever going to shoot up, right? Like you think, like you're imagining in your head it might. Um so like oh my go it goes up 5%. You know, that's not going to happen. I don't think that's ever happened. I would have to look I know there used to be or I've had I believe in you know loans and things that there were and some adjustable rate things I did in the past I've had or familiar with people did that there was a cap on what it could do like two points over a period or something like that like so you were protected on the upside. So, the first mortgage arms do have like a yearly cap such as 2% per year, but the prime it really I don't want to say the sky's is the limit, but they uh they have a cap in place, but I want to say it's like 18. Now, will it ever hit that cap? Probably not. But, um there's not any, you know, yearly caps on those typically, but if you look at how the prime moves, it would be a quarter point here, then it might be another year. You know, it might then another quarter point or half a point. Currently, we have been in a decreasing market. The Fed has cut the rates uh several times now in the last year. So, anyone with a home equity line has greatly benefited from that. Their payments have gone down. Um so, yeah, I guess it's something you'd have to weigh. You can always refinance that equity line. You can put the equity line back into an equity loan anytime and lock it in, right? So, I like done potentially. Now, the benefit of a line of credit is typically it has a 10-year draw period. So, even our renovation line, you use it for the renovations. Now, you pay it back and you just keep it at a zero balance. No annual fees, no monthly fees. You can keep it at a zero balance, never pay anything, and then in two years from now when you have another project, now you want to redo your bathroom or do something else to your house, you'll have the money available, right? Or you can even buy a car with that equity. You can buy a car for college expenses and the interest is taxdeductible, right? Because it's connected to the house. I am not a licensed tax adviser. However, I know like when you use a home equity line for the purpose of renovating or things like that, I want to say there's a tax benefit. Okay, we're not tax people. That's not a thing. Don't talk to your people, whatever. But there may be some benefits there, right? And with that equity line from a tax advantage standpoint, especially if used for renovating, talking about this future value thing like so can you walk me through because a lot of people have no idea what that like what do you mean by that? Like how does that work? So try to unpack that for me a little bit. How do you explain it to people? Yes. So we you I'm going to use another acronym here. ARV stands for after renovation value. You'll hear ARV. Okay, you'll hear me say that a lot. The main thing that separates Renify from any bank or other mortgage lender is that we use the ARV with the HELOC. Many people ask me, "What's the difference between your HELOC or your HELO loan versus a regular HELOC or HELON?" My answer is it is a regular HELOC or HELON. There's two key differences. Number one, we are going to review your plans, your contract, and your cost breakdown and your budget for the project, and we are going to appraise your house as if your improvements are already done. So, if you're building a 500 foot edition, we're going to be appraising your house with the additional 500 ft. Okay? So, you're going to get that higher appraisal. Now, going back to the combined loan to value we talked about previously, where if you go to any local bank, they're going to limit you to 80 to 90%. your loans can only total 80 to 90% of the ASIS value current value right so if you're doing say a $400,000 project and your home right now is worth 1.4 million and even to be conservative on return on investment let's say the after renovation value the ARV is estimated at 1.8 we're going to do maybe a 75% ROI right we would be using the 1.8 8 figure to and let's just say your total your first mortgage is 1 million now you're going to finance 400k on your second mortgage our combined loan to value is much lower I mean if you were if you were trying to get the 400k on a 1.4 for ASIS value, you're at 100%. Not possible. Not a thing. So, this will allow you to go up higher. Not only that, let's compare something else. Say you had some cash of your own. And you could contribute 200k and finance only 200k. In which case, you'd be able to get a 200k mortgage most likely or a heliloc rather from your from your bank going up to 85% or 90% of the current value. However, they're going to base their interest rate on this that CLTV has it controls rates. It's one of the big factors that determines your interest rate. The higher CLTV you are, the higher your rate is because they're using ASIS value. Even at a 200k loan amount, your interest rate might be a point or two higher than mine because we are going to use the future value, the completed value. So, it's a lower that's a lower percentage, right? And so, CLTV means combined loan to value, right? Is that what you mean? The combined loan to value ratio. Yeah. So your first mortgage, you know what it is, and then your new second mortgage, your heliloc, right? So in the example you were giving, the first mortgage was a million dollars and then the the second mortgage, the heliloc for the project was going to be $200,000 because you're going to put the two down. So that's 1.2 million combined. And so then when you to find the CLTV is you figure out what percentage the 1.2 million is of the total value of the 1.4 being of the Yeah. 1.4. 4 as is. But if it was worth 1.6, say completed, then you'd be at a combined 75% CLTV. Yes. In that scenario, often times what I show people is a sidebyside. Okay. Your bank offered you a 90% CLTV HELOC at a rate of 9%. Right. With my ARV loan, we are at we're below 80. That shaves off a point and a half to two points off your rate. We're now looking at a 7 and a half rate where you're paying remember that minimum payment of interest only is based on that interest rate. So even if they wanted even if they only needed 200, they only wanted 200, you're still better off with the ARV using the future value. Right. Right. Is your rates better better long-term loan? All that kind of thing. So and you would be able to put that kind of sideby-side comparison together with real numbers. Yes. For someone that you're talking to and actually instead of this esoteric, nebulous idea that we keep making up is that like you could talk about, you know, Mr. and M's, you know, homeowner at their house in this place and run real life comparisons for them of here's what you got. This would be your LTV kind of thing on a standard HELOC. This is what I can do for you kind of thing and show them side by side. Yeah. The other uh comparison I love to do for people is a HELOC versus a helilone comparison. And for the purpose of any sort of renovation, home project, construction, I highly encourage the HELOC. And the reason is projects get delayed. they have additional costs and having a heliloc, you're only paying interest on what you owe. When you have a project, they're usually not writing a $400,000 check right out of the out the door to the contractor and that's that's what they pay. No, they're usually on a payment schedule, right? So, imagine you're on 25K up front for a deposit, then you owe another 100K, you know, part of the way through. You're only paying interest on what you're using at the time. So, you can save yourself tremendous amount of money. You don't want to use or spend the money on payments before you even spent the money on the project. Right?
A lot of the people that we work with are highly qualified, right? Highly qualified. They, you know, they make great money, they got good credit scores, they have, you know, those kind of things. But what would be something that even if you find yourself in that area, but what's a thing you can do to make yourself more attractive to a lender? you know, kind of an easy thing, you know, not some, oh, it's it's like, oh, do a 10-year credit rebuild kind of thing. Like, okay, that's going to take a minute, but like what are some things we could do short term? So, specifically in the renovation space for Yeah. just to make yourself more attractive to a lender, like before I go try to borrow some money, what should I do to kind of, you know, obviously pay my bills on time? Like some of that, what would you say? You know, the obvious, keeping your credit pretty clean. Um, keeping unsec as many unsecured debts as low as possible, things like credit cards to keep it clean, having your paperwork in order, right? Um, you'd be surprised how many people can't find their tax documents or, you know, make sure you have all that ready. We're going to need it. Um, even the home equity lines and home equity loans are a mortgage. So, the process in terms of what you're going to supply us is pretty similar, right? Um, and let's see. I mean in terms of the renovation loans I would say having a professional builder that I wanted to go there right so then what so I don't know what's the most important thing here but like what type from a as complete value right now we're talking about that so because every I think everybody kind of gets and understands the borrowing against the house based on what it's worth today and that's pretty standard everybody can do that to some extent like you can go to the local credit union you can go to the bank you know that's all pretty But this ascomplete future value after Renault value as as you guys call it at Renifi is the very rare very rare. That's like to me that's kind of the holy grail of of project funding is that you can do that. Um now I want to talk about the second mortgage and leave the first. We haven't gotten to that yet but we will. But what would you say is the thing that talking about that is that the the best projects what do lenders love? Where is that return? you know, like if like, oh, if I just add a bedroom or I do this, like what is going to where do you see that? So, I would say as as a lender, we're not too concerned with what exactly you're doing. There's certain it's easier for me to tell you what we won't finance than to tell you what we will. All right, perfect. Um, for instance, there are things that are not Fanny May approvable, such as I'll give you a big one. I know people can build two ADUs, but we won't finance two ADUs. Okay? So we can finance one and they would have to have their own funds if they wanted to build that other one just because Fanny May doesn't allow it. In terms of other projects, things that add value that maybe it's easy easier upfront to kind of get an idea or to gauge where we would stand on a return on investment would be an addition where you're adding gross living area cuz it cost per square foot the area. It's a much easier kind of calculation you can do. It gets very subjective when you're like, "Oh, well, we made the kitchen nicer." Yes. you know, like well, you had a kitchen and it was worth this and now it's a nicer kitchen, like, you know, but where's the how much? And not everybody wants a pool, right? You know, so like things like landscaping pools, um I think those are more you could do it. You just you should have the equity now because they may not add very much on our ARV. Landscaping pools, things like that do not add um to the after renovation value. So, you're not going to be a you're not going to be benefiting from the ARV loan if you're not doing a project that would at least net some sort of return. At least in in the eyes of our appraiser. Yeah, I got you. So, like, oh yeah, spending $200 $300,000 to put on a a pool house in a pool and out the backyard, you know, kind of blow that out. That might not You could see a lot of return on that immediately. I'm not saying we won't finance it. We will. But you're just not going to like you can't count on all of that money coming back right away. When somebody comes to me with a project like that where it's all landscaping or they're building an outdoor living area, you something that's really not going to not going to add to our our value, I get a little bit worried and I do try to give them hypothetical examples of we need this value to get this loan amount and if we get this value, here's the options. Now, if we do have a low appraisal, we have solutions for that as well. Um, we don't just have mortgages. We actually Renify has unsecured renovation loans, meaning personal, no collateral, right? And those go up to $100,000. And I sometimes have to add a personal loan to supplement the heliloc or helil loone when we do have a short value. Okay. And so that was like the next thing is like so what sounds like right here they most creative project most like you get into some crazy stuff I would assume right in terms of like pulling people together and getting them sorted like you know give me that one war story you know the thing you tell like oh we had a guy the thing what's like what the craziest thing oh gosh I mean there's so many um wild stories and I've had several where that they just bought the house and they went and gutted it on day one and you know just thinking they you know, I have a few hundred of my own money and then I, you know, I'll swing the rest as I'm earning income down the, you know, as the project's going on and then something happens where it's uncovered during the demo. They need, you know, some other expense is going to have to Yeah. is going to come into play there and it gets much more expensive and suddenly they're sitting there with a gutted brand new house that was gutted and uh they don't have a way to finance it. So, I mean gosh, I've in terms of projects, I've seen some crazy people build some crazy things. I I had a guy recently build $150,000 deck, which I didn't even know decks. It's just Oh, yeah. For sure. You know, it was big. That's the thing. That's the thing. Yeah. It was two stories. It was Okay.
Everyone is interested in this. This is a big deal. So, let's get Megan's take. ADUs, DADUs, that whole thing. You just touched on it that you can you can finance one but not two. So let's spend some time talking about that because everyone wants to understand what that's like. How does that the fact that you're talking about ADU, DADU, whatever that case may be. How is that change your part of it? How does it different for you? What do you do different? Is there any differences? Kind of get me up to speed on how that works. Yeah. So, we do finance ADUs, as I said, just one, and that can be detached or attached. And I find a lot of value in these. Many, they're becoming increasing increasingly popular. Oh my gosh, they're blowing up in certain areas. And it's not just people, you know, looking to create extra revenue in their house to help with their own bills, you know, rent it out, but, you know, understanding where rates are and they don't want to get out of there. I mean, you might be a lucky person with a 2.875 interest rate on your first mortgage. And so building on your property, maybe you have either an elderly parent or you have a kid who's out of college and it's a great place for them to live or you just want to rent it out. They're becoming popular. Is it, you know, an accessory office? One of the things we're seeing or office space, the whole, you know, work from home and ah I can't be in the house, you know, like that kind of thing. We see a lot of that. And the thing with ADUs is when you get an appraisal for an ADU, I will say this, they're all over the map. And the reason is we need comparable homes. So if you're in an area where ADU not a lot have have sold yet with an ADU, they're going to the appraiser is going to have a tough time finding the comparable homes to to give it a value. So sometimes the ADU values on our appraisal report don't come in as strongly depending on the market. However, because it's unique, the value that the homeowner gets out of it is a whole another story because whether you're using it for a family member or whether you're renting it out, you can calculate, you know, it's really easy to take your renovation loan payment and say, "Okay, my payment's 1,500 on this ADU. My rent I'm getting anticipated to get, right?" And and kind of do that math ahead of time, right? You're going to get an idea of how much it's going to cost. I'm working on and I think I'm pretty close to and I probably should have looked around. There might be a thing out there, but I tend to just go do stuff. Building a little calculator to like combine because it's really easy to find a little calculator that will give you like ROI, like what my project cost to build the D-ADU, what my rent income is, and kind of my maintenance and sort of what is my return on investment just in and of building and then renting out of space. That was kind of easy. But what I wanted to do with mine is that because for the people that we're talking to and that are talking to us and asking about it is that that's only one aspect of it, right? So you get that return on investment on that money you spent to build the DAD ADU and turn it into a rental income thing, but the super bonus is that your property is worth more. Right. Right. So like you have that $1.4 $4 million, whatever the value of your current house is, you build this ADU, a DADU, and the day that's done, your property jumps from this value to this value, right? And you've leapt up. And so then that appreciation builds. So there's that long-term build in increased value equity that you get out of that plus that sort of monthly return income kind of thing. So, I'm really trying to figure out how to help people understand that and express that in a way that's reasonable. And it's been a challenge to get that spreadsheet to make sense. Yeah. And to take that even one step further. A lot of people, especially in your first house you ever live in or buy, right? It's probably not your forever home. You're probably going to move a few times, right? And many people determine when they're selling or when they're moving rather, whether they're going to sell it or keep it and rent it possibly. and building an ADU is something to think about in the future is how much you know if you did turn it into a rental or an investment property in the future it would be a lot more profitable um so you can look at it that way because then it would be combined with the the main dwelling in the rental space. Yeah. So now from a lending standpoint, does it change anything for you? Are there different rules or like Oh, so it's it's essentially it doesn't matter to you or the lenders that this is ADU or D other than you can only do one. We're not going to do cuz I have talked to some people that they want to build a DD sorry D AU in the backyard and then an ADU addition onto the house. So essentially they're going to wind up with three things. They got the main house, they got the ADU addition to that main house, and then they've got the detached separate DADU tiny house kind of thing in the backyard somewhere. Yeah. And you're only going to participate in one of those from a lending standpoint. Right. Right. Okay. We are only allowed to finance with the secured loan with our our home equity line or home equity loan ADU. Now remember, we do have those unsecured loans as well. So once the first project is is done and they wanted to do a second one, we can't stop them from building the second one, but we're only going to be financing on that home equity. All right. Well, let me ask you this. So say that someone um wants to do that wants to do that exact project that we just talked about. I want to build a DADU and I'm going to do an addition. All right. And the total combined project cost is $600,000. I mean, it could easily be that, could be more, but just say it's $600,000. and I come to you and I say, "Hey, Megan, this client needs a loan for $600,000." Well, what is it? It's this and this. So, but the after, what do we call it? The after renovation value is going to be this number here. So, how then do you parse that out? We So, when we do the renovation home equity liner loan, we will not be seeing that. We're not going to look at the other the other ADU. We're only going to look at one of them and appraise the house as if it only has one. All right. Well, what if it's an addition to the house and just a renovation there? So, if you had an addition with an ADU, now that's a different story. That's what I'm talking about. So, I'm building I'm building a DADU in the backyard, completely separate, and I'm renovating the main house at the same time, which that renovation happens to include a small addition that one could conrue as an ADU over here. And then that total redone value is this. So, how do you tease that out? I understand. If I was to throw that by you, what would you say? I would say as long as it is an addition. Um, and the paperwork shows us an addition with a dad, that is allowed. Okay. Yeah, we can lump as many projects. That addition has a kitchen in it. Okay. So, that how now that main house has got two kitchens. So, ooh, see the kitchen makes it a little bit more difficult. Scary. We have to That's where we have to be very careful. All right. We get into that, we'll call Maggie. It could be an in maybe an in-law suite. Exactly. A study exercise. It might be a game of a little language. Okay. All right. So, I get you. All right. So, all right. So, then so from a ADU, DA DU standpoint, no real change in lending world. Now, there's differences in permitting and insurance and, you know, some of that kind of stuff, but from your aspect, not a ton of difference. Yes. And by the way, we do not look at the permits or any part of that process. We if the permit cost is listed somewhere on the cost breakdown. We that's we verify that. But pretty much that's it as far as permitting. Oh, now that's a good point. Great segue. Thank you for doing that. So then I the next thing I wanted to touch on quickly was because we're talking about and I think one thing we skipped over. So maybe I'll go here first just to make sure that we get out that this is is such a big thing. And I I I mentioned earlier that the holy grail of lending right now from a renovation standpoint and what makes what Megan has the holy grail of lending in my opinion is that their heliloc product which she talked about second position remember first and second position is that doing that as complete or after renovation value where you're looking at the value after the project's done and getting a heliloc based on that new number. The real super thing and that the only one that does this is you that I'm aware of is that you can leave if you happen to have lived in your house long enough that you have one of those 1.75 1.8 1.9 2% mortgages. You can leave that in place. You don't have to touch it. So you can maintain that super low rate on that first mortgage and get the benefit of that second helock kind of thing behind it on that future value. Whereas most lenders on the street that I'm aware of, other than you guys are going to require you to refinance that whole package. Yes. And move that first money at that one and a half 2% kind of thing up to a much bigger number. Yes. Yes. So rates have held stubbornly high for a while now. And there are some very lucky people who are locked into very low mortgages. One of the one of the biggest benefits um of our program is getting to keep your first mortgage separate. And you know, I'll touch on this too. A lot of people also like to keep it separate because if they're building the ADU for a family member to live in, often times that family member pays that and it keeps it totally separate. So, um anyway, so yes, keeping it separate is important. And I like to look at blended rate, too. I show people they get sticker shop shock sometimes when I quote, "Okay, the rate's going to be 8% for yours. You these vary depending on FICO or this that the other thing." And they get sticker shock and I go, "Well, it's better than taking the renovation. you know, they might have gotten quoted a 6 and a half doing the Fanny May homestyle renovation loan. And I go, "But you're taking your your whole rate on $800,000 is now 62. Whereas if you kept your 3% and I gave you 300 or $400,000 at 8%." Turns out your blended rate is more like 5%. It's about a point and a half lower than what you would be doing. You're better off. Exactly. you're better off paying the 2 3% on this number and a little 8% over on this because together combined that's less than moving this number up and this number down. Now I can do the Fanny May Home Solo loan. I'm I'm a broker. I do purchases refer great idea. There was actually a situation recently where it was advised for a client because they had a very tiny first mortgage left. They didn't want to touch their 150k left secured on their house because of that 3% rate, but they were taking on $600,000 for a renovation. And in this particular circumstance, it made sense. It makes sense. Okay, so let's touch there. We're kind of getting down to the end here. One other thing I want to talk about, and this might be um this might be a little bit too mortgagey for a lot of people, but what about buying down a rate? There is no buy down. There are no buy downs on the second mortgage programs. They do not operate like points. First of all, the home equity line is adjustable tied to the prime index, right? So, so you can't buy down like prime minus one. No, you can't lower your base, right? So, what I mean when I say buying down a rate, which you can now, it sounds like only do in a first situation, first mortgage, right? So, say you're going to buy a new house, like you're buying, so you need to get a first mortgage and they tell you the interest rate is 8%. Then you could give them some amount of money, buy it down, and say for if you give me this much money, we'll charge you 7% or 7 and a half. And you can lower your rate, but essentially you're paying that sort of fee interest upfront. So that's a way to lower interest rate, but not available on a heliloc or second stuff at all. Not at that. Not on these ones. I do have a fixed rate second mortgage, not the renovation one that you could buy it down, but So buy it down. All right. So then the the next thing I want to touch on with you because we're we we we kind of covered that basic mortgage stuff. We talked a little bit about that as complete a lot about that heliloc and whatnot. And so then the next thing last thing I want to get into and again thank you for coming. She drove up here from Portland to come see us and do this. So this that's like a three-hour drive. So a very big commitment and we thank you for that. Um, but so what how important talk to me about the value and the role and how hard you guys look at and think about the builder, the person who's going to be doing the work to create that after renovation value like how how much like where does that land? Well, I could touch on the reasons why having a professional builder is important for the whole process. Number one, we perform due diligence on our we vet all the builders and we make sure they have no history of not performing. So with you, for instance, Armada, you've already passed our due diligence. We've completed projects, completed the financing of projects for you, making every future project easier, right? Um, we do that for a reason. We also perform a feasibility review. There's a lot of paperwork that is required from the builder. And if you uh are not using, you know, maybe you're using a one-man shop who doesn't, you know, do certain things on the paperwork or provide certain things on their standard forms, it might be more difficult. They have to pass feasibility, has to pass due diligence. So, in terms of the process, working with a professional is important. Number two is I see this happen all the time. I see somebody try to act as GC themselves and they hire a bunch of subs and nothing ever works out, right? Because inevitably something's more expensive. something. Um, or one of the subs ends up getting fired halfway through. One of the subs can't pass due diligence because they all have to pass in that case. We will allow you to GC it, but we have to pass everybody. Oh, that's where I was going to go. So, what happens if someone comes to you, they've hired an architect, right? They got a nice plan. Yeah. All right. And then you can go get that appraised that that after renovation value. So, I got a great plan drew up, professional, looks good, cool project, adds value, all of that stuff. Check, check, check. But I'm going to run this myself. I'm going to be the GC. A homeowner inexperienced, doesn't know what they're doing. Now what you go and now you have to scrutinize every person that's going to participate in that versus if they hire a general contractor. You just vet them. We Yes, exactly. With a GC, we're just going to vet that one person. And when you I have seen gosh up to 10 or 12 subs on a project before. Let me tell you how long the process takes. the homeowner by the time we're even halfway through the due diligence process is already they've already lost it because there's so much paperwork back and forth with these the subcontractors oftentimes are not great at doing paperwork. So we have to make sure they're all insured. We have to we have to we have to verify every single thing that's being done on that on that plan and who's doing it and vet them all. So you don't I would say so that sounds like a headache. It's scary when I see a file with more than maybe two subcontractors. Right. Right. Right. Okay. So if you're then so your advice then if if you need some after renovation value lending you definitely need to talk to Megan. She's the only game in town, right? So sorry about that. We love her. We use her clients. It's great. Um so that's important. But that builder so you don't have to use us to work with Megan. You know we're not exclusive. We don't have rights. So, we we would like if you did, but you don't have you can just call her, email her, reach out to her, but if you're not using Armada or a general contractor type situation, then that scrutiny level is different. Your process is longer and just be prepared to have all your ducks in a row and to let your subcontractors know they better, too. Okay. Yeah. All right. There you go, Junior general contractors. You know, maybe not the time to learn. maybe get some help and we'll do you can do the next one that's a little easier to do. How does that sound? All right. So, um Okay, so we're getting down to the wire here. I want to thank you so much for coming in and doing this. Um this is actually the first time Megan and I have ever been in the same room. Now, we have dozens and dozens of hours of FaceTime and phone calls and emails together, uh but never been in the same room. I guess that's just way of the world. So, what would you say? What would you want to say, Megan? And probably need to get you back to go a little bit deeper and nerd out sometime at some point. Um, but what would you say is the one thing that you would want someone at home who's not familiar with this that like, okay, what what did I learn today? What should I take away from this? What my time to watch this? I got something out of it. What would be those one or two things that you would want to look at the camera and say make sure you do this or don't do this or be sure of this? What would that be? I would say that in the renovation lending world, it's not one sizefits-all. There are multiple options and the sooner you start your planning process and meet and discuss the financing options, the better. I would also say that it's not as difficult or cumbersome as people like to think. People get scared with the term construction loan. This is not a construction loan. We are tapping your future equity and you which will be your equity as soon as this is completed. No draws, no inspections. We are not going to drive you crazy for months and months on end. I would just say it's a lot easier than you think. It's a lot more affordable than you think and the options are many and even if you have the cash, right? Because a lot of people I talk to because again this is, you know, we've deal with a lot of reasonably affluent people and I'm like, "What are you thinking about?" I'll ask them, "What are you thinking about from a funding standpoint?" And sometimes they get a little like, we're just paying cash. And I'm like, are you sure that's the best move? I say opportunity cost, right? Are you sure that's the best move? And bully for you and congratulations for being able to do so. You know, great work. But is that really the best move? But also with the with the renovation equity line, it's a line of credit. You don't have to use it. You could use some of it, use all of it, use none of it. Right? there's there's not going to be any harm, but having it there might be life-saving if you end up uncovering some a problem halfway through and your project goes over by 150k. Yeah. So, if you're thinking about it, talk to Megan, give her a call. She's great. Um, if you want to find out like, "Oh, well, I call Megan and I got to have something to tell her, right?" Well, then this is true. You do. So, you know, call us or somebody and say like, "Oh, I'm thinking about this. What do you think that's going to be?" And then you can call Megan and go, "Hey, Megan. I talked to some people. we're thinking about a project. It's going to be about this much and this is what they say and then in a 10 or 15 minute phone call I've watched her educate someone and like oh yeah you could totally and like you learn so much and then it's real practical stuff. So she's handy. She you know good brain to have around to get some good information out of. So give her a call. She'll help you learn email. We'll put all that stuff in the description. Thank you very much. Yeah. Last thing, parting shot, you know, don't be afraid of financing. That's it. It's easy. Oh, I will say this. I will say this is that I got my wife and I, we got a heliloc from Megan after we found them and went through it and it was a pretty easy process for me. Not for Megan cuz my wife's got a business and we got this and so like it's not an easy thing. But I will say from our end of it that it's not like the old days. If you're old enough to remember where you have to print two years of tax forms and find your thing and bring paper, it's all uploaded. You do it right from home, you can every document you can just put on the website and there you go. You don't need really anything. I mean, it's all very simple and easy and you guys approve it online and then you get your stuff and it's super easy to do. So, that part's very easy. So, I would throw that in there that that was simple and convenient. So, good for that. What else? Last thing I would just say it's a very easy conversation anytime. I'm happy to do pre-qualifications. I will walk you through the process and go through what options are best for you. There are sometimes where the personal loan options were better for that client for whatever reason or the HELO loan is better than the HELOC for them for whatever reason. So, it's not scary and there are a lot of options out there and I yeah, I'm always happy and I would say if you if you just start at renifi.com. Yeah, right. renifi.com. That's the website there. And then you're Megan at You can find me on the website or I'll show you my link. Megan Renofi. Again, we'll put all that in the description. But thank you very much everyone. Thank you Megan. I appreciate it. Anton, thank you sir. Everyone, you don't see Anton behind the scenes here making this happen. Josie, all the people around here. Let's build with Armada podcast. Thank you. Leave comments. Send us notes. Stop by and see us in the in the showroom. Give us a phone call. We love to come out and see your space. Talk about an addition, how we can, you know, get you some money to do that project. You want to build that DADU for rental income. Hey, we got the solutions. We got insurance. We got Megan for money. We got Ryan with the real estate. We got Keith from earlier with Doors and Windows. And there's going to be a lot more to come. This is going to be a place to learn and find out how can we maximize this home. You see all these videos about people like they're just crashing out. I hate this house and this is the worst. This is a big deal. It's a good investment. And it's it's a vehicle. It's a financial vehicle. But it's also where you raise your family. It's where those memories are made. It's where you have those meals whether they sit around the table like we were talking about with Ryan or you do it in front of the TV or whatever it is. But this is your holidays, your birthdays, your things. This is the backdrop of life is your house and we just want it to be as cool and enjoyable and functional and effective as you want it to be. We want to help you achieve that, create that, have that space, whatever that is for you. It doesn't even matter to us. Big, small, expensive, inexpensive, you know, weird, cool, it doesn't matter. What is your dream? What are your goals? What can we do to help you achieve those things for you? What could what can we help you do that you otherwise could not have done without our help? That's the reward. That's the plus. Give us a call. Stop in. Check out the website armabuild.com. Charlie with Armada Design and Build in Belleview. Thank you very much. See you next time.