Ok, this one has me spinning. Borrowers live in house; the Bank makes a permanent loan to payoff the existing mortgage (secured by house). Ok, so far sounds like a refi.

However, after closing, a chunk of the funds (in addition to a grant from a housing agency) were used to build a new house behind the existing home. Once the new house was complete, the borrowers moved in, and demolished the house they were living in.

Would this be a refinance or more properly a purchase (construction/permanent)?

Thanks, MarkB

Since funds from your loan were used to construct the home, IMO your loan should be coded as a purchase.

ETA: I think an important consideration would be what you knew at closing. If they didn't indicate that the additional funds were to be used to build a home, i don't think it's your bank's responsibility to monitor the situation going forward. But if you knew of the plans to build the house (and it sounds like you might have), then i'd report it as a purchase.

Thanks Raitch. Yes, we knew going in that that is how the additional funds were to be used, and once the new house was built behind the existing, the existing was going to be demolished.


MarkB