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.
Progress Update
Well, according to our Gantt chart (schedule), my wife started getting permits last week… Except we are not actually there yet. Instead we will be filing banking paperwork on Monday. I don’t want to bother with the permits until the loan is approved. And we were waiting on a tax return and an extra paycheck to beef up our funds before we applied for this year. So, its a good thing I padded the schedule a bit so this delay shouldn’t affect the date we hoped to break ground. I am still nervous about dealing with the mortgage company though.
Virtual Build
Things have been a bit busy at work and I am working on a paper for my “adult onset MBA”, so progress on the virtual build has been slow the past few weeks.
I did manage to get the Skylight curbs on. They look like industrial chimneys now, but they will be mostly covered in earth and that should soften them up. I may need to adjust their elevations a little. Originally, I had them over the showers. I installed skylights above the showers in my current home and I really enjoy showering in the sunlight. Of course, it would be a lot easier for someone to just walk up and look in the skylights of an earth sheltered home, so I will need to use frosted glass. The architect moved them to the middle of each room (for symmetry). But the virtual build revealed that I would need to cut central steel arches, so I moved them back.
I also worked a bit on the front of the house. I got the steel structure up in the front wall and added the concrete sun shade to the front of the house. It still has a long way to go. For instance, I need to put the steel structure to support the concrete shade, add a bunch of roof structures and the front door is still missing.
One thing to note is the way the foundation dips on the right hand side… This is the cost of having a basement that comes closer to that corner.
Sourcing
As we get closer to the build, I have been getting updated prices on things like the steel arches. The price has actually come down some what. Also, since I get charged “by the bend”, regardless of how long the bend is, I have adjusted the order so that pieces of the same radius can be bent as one long piece and then be cut to length. That will save me some money.
I did find that the 5/8th inch thick steel support plates that the engineer specified in many locations are somewhat difficult to find. All the steel suppliers I called said they would need to order that specially for me. I had only needed a few square feet, and special ordering has some minimum area requirements which will raise the cost for me significantly… Not sure what to do about that yet.
Do-it-yourself Electrical?
The biggest change to my sourcing plan was due to a conversation I had with an electrician two weeks ago. He is out of the business now, but still licensed in my state. He looked at my pictures and said he could understand why the bids were so high. Electricians don’t want to figure out how to do my unusual house when they can just get regular jobs. The FUD (fear, uncertainty and doubt) translate into a high bid. But there were also real reasons why it would cost more. They would need to use more conduit, need to more carefully secure the boxes, etc.
He suggested that I should just do it myself. I told him that I was already planning on taking on too much of this build myself. I have wired a few outlets and lights, but never something as serious as an electrical panel or a large as a whole home (or even a whole room)… He said he thought I was smart enough to take care of it and I could save 3/4 of the bid price. Anyway, I am seriously thinking about it and got several books on wiring and the electrical building code this week. I do know some home builders who did their own electrical. Perhaps, I will do most of it and hire someone to come out and give it a once over…? At the very least, I can handle my own “finish” electrical.
We also attended a local building show this week. It cost us $10 at the door, plus we bought some of those roasted nuts for $6 more… Those shows are never really worth going to, are they? We talked to a few people, but nothing really changed.
Website
Well, I am up to about 2700 visits a month (over 5000 page views), which isn’t bad even if half of those are robots or mistakes. This past month I had a couple interesting encounters on the web.
Comment on other sites?
First, someone on the the Malcolm Wells Yahoo group posted a link about Earth Tubes. I jumped on it right away and found it was my page on Earth Tubes, but on another site. It was the sort of site that has a number of revenue generating adds and the writing at the top of the page said “Written by David”. They had done a full copy and paste, so the images were actually still on my site, but hyper-linked into place. The site had no contact information anywhere on it, but using some Google search, I found a video related to the site. Scrolling down in the YouTube chat, I found where “David” had a conversation with someone and ended up giving his email address. From that I was able to find his google+ page and his LinkedIn page. Eventually, I even found his mailing address (in the USA). I emailed “David” and asked them to give credit where it is due.
While waiting for a reply, I looked around the site and found that pretty much everything was just copied from other sites, but all claiming to be written by David. About 2 hours later, he wrote me back to say he was sorry and had added a line at the top with my name and a link to my website… Oh well.
I saw another website (in Czechoslovakia) had also linked to my site and described it as a “very long, but detailed, overview of Earth tube design”. I guess I need to work on being more concise ;^)
Comment on my site?
Of course, the opposite also happens. I had referred to Larry Larson on my page about Earth Tube design. However, while I gave him a “nod of the hat” as an expert in the field (literally since he professionally installs earth-tubes out in the “field”), I disagreed with his opinion that the tubes need to be corrugated and laid in a serpentine path to generate heat exchanging turbulence. I also made some generally disparaging remarks about the use of corrugated HDPE pipe ;^).
Larry contacted me.
Actually, nothing too dramatic. He just wanted to discuss my concerns. He writes even longer emails than I do, but we had a number of back and forth email exchanges. It may not be quite over yet, but I am still pretty certain that his serpentine layout is detrimental to performance. However, I have softened on my critique of the corrugated pipes in general. He argues that they win in terms of “bang for buck”, and perform well if installed well. When I have the time, I will go back and adjust my text a little.
One good thing that came out of our exchange is that Larry is going to post some earth tube performance data on his site. The data (which I am privileged to have already seen) shows the inlet and outlet temps and humidity of the earth tubes in his own home (in Iowa) over a 10 year time frame. He showed me some graphs and they were pretty interesting, but the samples were taken by hand. He said that my soil temperature experiment inspired him to get some small data loggers from Thermoworks and install them in his home and in some of the other homes that he installed earth tubes for. Including one that has better performance than his own home. He plans to publish the graphs of the inlet and outlet temps for each home every 3 months or so.
I also plan to adjust my plans a little and have a corrugated earth tube come into my new home “for experimental purposes”. If it causes any problems, I will just block it off. The delta cost will be small since I plan to use my drain tile for the job.
Virtual Build
Over the past couple weeks, I put in half an hour here and there in the evenings and moved the virtual build slowly along. Of course, I would be thrilled to get this virtual build speed in the real world ;^) Initially, the plan was just to illustrate the building process for various subs that would be helping. I planned to just show the construction of the basement, central tower and how the ribs would be setup. However, as you may have seen over the past couple posts, the virtual build has already helped find and solve so many problems that I have decided to press on with it. I added the garage and I am currently working on the bedroom wing. Next, I will work on the front of the house.
Virtual build as of Feb2nd, the garage, mezz and other areas are mostly complete, I am working on the bedroom wing and will work on the front of the house later. You can already see that this house design is very original.
I had been thinking a lot about how to lay out the ribs while I was casting them, I thought it might be a good idea to illustrate that with the virtual build. For a long time, our plan has been to pour the garage slab early in the build, but only setup the rear of the quonset hut. I could use the partial construction as a covered workshop in the back while I setup the rib forms on the front half of the slab. Without the roof in the way, I could use a crate to lift the 4500lb concrete ribs up and over to where they would be set.
I had planned to make a left and a right rib form because it would save me needing to flip and polish the “back” side of one that would be exposed against an end wall. I had already worked out (mathematically) that I could fit two of these on the slab in front of the partial quonset.
Now I was working on my gantt chart and considering how much time would be taken making these only two at a time. I also considered how much extra cost would be incurred with the multiple crane visits (to set them up 2 at a time). We had already planned to put a slab in-front of the garage (even if the rest of the driveway will be gravel), so the boys could play basketball. I started considering the option of placing the slab earlier in the process and building a few more forms. Even if the extra forms cost an additional 600$ each, I could make 2 more and save on 2 expensive crane visits and a couple weeks of time. I would probably at least break even on money, but save time.
There would be no additional cost to adding the concrete pad early since it was already planned for later in the process, but it may later be seen as “in the way” as construction equipment would need to be careful not to crack it…
So, I added the ribs to my garage model… You can see that it would be very difficult to fit a 3rd rib on the pad. Yes I tried other configurations, but I need room for the forms around the ribs and space too work, and I couldn’t let them go under the quonset or the crane wouldn’t be able to lift them up without dragging them. However, for the other ribs, I decided to make two left hand ribs and they can be put closer together…
Then it occurred to me that I needed to go back and reconsider my earlier decision about wanting to start with a left and a right rib to save time/money polishing (because one side would be placed against a wall.) I decided that I would save more money and hassle with the more compact arrangement of same-side ribs. In the software, it is pretty trivial to make the necessary changes and voila! Four ribs in a compact arrangement on the one slab.
I will update the Gantt to show building two forms first, then working on the second two forms while the first two ribs cure… Then I could position all 10 ribs in only 3 crane visits instead of 5. Of course, I still need to polish the back sides of the ribs, so I will need to flip them over before I set them, but I can place them in the (soft) dirt for that and I think I can get that done with only one extra crane visit for the full set. It seems like a plan for now.
Other revelations included that the steel stud layout for the bedroom was messed up by the architect (yup, I checked my original notes). It was a classic symptom of 2D design where the various views, created separately, were not actually compatible or build-able. I went back to check my original notes and sketches that I had sent in and they were correct, so I guess the architect just didn’t understand. I will document that another time. Lets just say my errata list is growing.
Sourcing
I have started hearing back from various contractors and the bids are looking much better. I got a very reasonable excavation bid to go with my good footings bid. I got bids on hooking up my electricity (a very reasonable $285 to setup the temp construction meter and then about $4.60/ft to run the permanent cable and setup for 400 amp service. I am waiting on an electrical and HVAC update that should be in early next week. It is clear that I still need to find a reasonable plumber bid (the 6 I got last year were all either too high or too un-reliable).
I also got prices on HDPE pipe for various diameters… Trying to understand the pricing structure better, I divided the price by area, weight, etc. and quite reasonably, it turns out to be priced by weight. $1.25/lb, delivered. For 8 inch pipe with a 1/4 inch wall (HDPE 8″ DR 32.5), that comes to about $3.83/ft. I need about 450ft for an earth tube loop, plus about 350ft for internal duct work in the house… So that goes into the estimates.
Shotcrete meet
A highlight of last week (for me anyway; I am not sure how your week went ;^) was a meet with my most-likely shotcrete guy. I have been talking to a couple other potential shotcrete contractors, but one is just not big enough scale and the other is not really sure about the whole earth sheltered concept. At this point, I trust Nate more than the others and I think his prices seem fair. The biggest problem is that he is hard to get ahold of. It has been more than a year since we managed a meeting. My project is just too unusual for him to quote confidently, so he had agreed to a time and materials quote, but I needed a better idea of how long he thought things would take and I still hadn’t got a quote on some aspects of the build, such as the specfinish on the inside.
I drove out to his place, which is about an hour from my current home and about 40 minutes from the building site (its a big triangle around Ann Arbor, MI). He had a couple big friendly dogs and a nice sized kitchen table to lay the plans out. I set up my computer and showed him my virtual build, my Gantt chart, etc. My main goals were to make sure that the plan for the build made sense to a professional and experienced shotcrete guy and to get good numbers for budgeting purposes. I showed him the virtual model and we talked about practical things like how to get the rebound (shotcrete that doesn’t stick to the wall and is, therefore landfill) out of the basement. We talked about the possibility that some of the non-load bearing walls could be built hollow (or filled with insulation) and still covered with a thin coat of shotcrete to match the more solid walls. We talked about hiring some of his guys to help tie the rebar (along with other tasks), and how quick they could work. He even shared some trade secrets about the fastest ways to tie rebar, plaster walls, etc.
Along the way thru the virtual model, we kept referring back to the Gantt chart, which included things like the dates for each of the 4 shotcrete phases and the amounts of shotcrete that needed to be applied in each phase. He factored in if it was high work or regular walls (which he kept referring to as “money walls”), etc. We discussed if the dates were good for him. He was a bit concerned about the first shotcrete date because it was in May, which is prime swimming pool season. The other dates are past swimming pool season, so he will be glad to keep his schedule busy.
We discussed equipment that I would need to rent and what his crew would bring (and the associated costs). No surprises there except that he mentioned he would bring lots of scaffolding at no additional cost, he just wanted me to make sure the floor was level enough to move them around.
We discussed how much notice I would need to give to schedule his crew.
The main rough patch came when I got to the part about using his gunite machine to spray the specfinish along the underside of the vaults. Nate did not want to do that. Apparently, it is messy horrible work. See this pic from monolithic.org where they create inflated fabric domes and then coat the insides with shotcrete to form the structure. Note the full body coverage including saran-wrap on the helmet. When the operators face gets covered, he can pull on the roll to get a clean section. My plan had most of the shotcrete structure applied from the outside and only a very thin (3/8″) layer applied on the inside, but still…
Nate said he would rather just have his guys apply the plaster by hand, but that sounds rough and slow to me. We talked about other alternatives including spaying on the ceiling with a drywall hopper gun or having an acoustic ceiling company come in and take care of it. I had already got a quote on acoustical ceilings, but my wife didn’t like the samples I brought back and didn’t want to consider it at the time.
Another option may be that I would use the same glue up styrofoam ceiling tiles that I planned to use to form (impress) the ribs. It may look good to have the same pattern in the vaults between the ribs, but I am a bit concerned about fitting the square pattern to the curved and radiating vault shapes and it wouldn’t work at all in the compound curved bedroom vaults.
I left the meeting with a few notes on minor changes that I needed to make to the Gantt and process and some homework to Google search a number of things that were discussed (such as a rebar tie belt with a reel). I also have the costs I will need to complete this portion of the budget.
