Question about refinance vs. home equity vs. builders loan for major work.

[woodsprite]

We had some damage to our house during Sandy. Not enough that we were displaced, but enough that the entire end of the house is going to need to be rebuilt from the studs/cement slab up (garage, den, & loft). It will also need to be updated to meet current building code. The insurance company is going to take care of the basic price on those things and we have a rider that will contribute up to 20K for updating things to current code, but we wanted to upgrade flooring/insulation, add a dormer to the rebuild and reroof the main part of the house so it the roofs match (it could entail bringing that roof up to code also).

We are still with our original mortgage company (10 yrs) and were contacted a couple weeks ago about refinancing. We're comfortable with the payments and thought we could refi and roll the upgrades into that. But when a house is refinanced, don't they have to come out and assess the house? Since we have a huge gaping hole in the den and loft, I don't think that would work. Houses in our neighborhood are going for about 80-100K more than what we paid for ours 10 yrs ago, so if it hadn't had the damage, I wouldn't think they'd have a problem coming up to a decent current market price. HOWEVER, it does have the damage and we would like to use the money to upgrade the fixes.

Has anybody run into a similar situation? We did have a loan for all new siding and replacement windows about 7 years ago. The window/siding company handled the financing for that, so I've never had to 'shop' for this type of thing before. Has anyone ever gotten a 'builders' loan when they had a large addition or major construction done on their existing home? Are they only for new construction? I'm not sure even who to start with - a bank or our mortgage co. Our mortgage co is holding the insurance payment to the builder in escrow, so it's not like they don't know about the damage. It will be doled out at certain checkpoints during the rebuild. They will also hold the final payment until they inspect the work.

If anybody has had any dealings like that, can you point me in the right direction to get started?