Sometimes the home that checks every box on your list also needs a new roof, an updated kitchen, or a bathroom that hasn’t been touched since the 90s. That combination scares a lot of buyers off, either because they assume they can’t afford the repairs or because they don’t realize there may be a mortgage option designed for this type of situation.
A renovation loan allows eligible borrowers to finance the purchase price of a home and eligible renovation costs with a single mortgage. Instead of buying a home and then separately taking out a personal loan, tapping savings, or maxing out a credit card to cover repairs, the renovation costs get rolled into your monthly payment from day one.
How a Renovation Loan Works
The process starts like a typical purchase, but with one extra step. Once you’re under contract, you’ll get a scope and cost estimate for the renovations you want to make. That estimate may be incorporated into your loan amount, subject to program guidelines and approved renovation costs.
Depending on the loan program, renovation financing may also be available for eligible refinance transactions. If you already own your home and want to fund a remodel, refinancing with a renovation loan may be an option.
Who Should Consider a Renovation Loan?
This option tends to make the most sense in a few common situations:
- You found a home in the right neighborhood, school district, or price range, but it needs cosmetic or structural work before it’s truly livable.
- You’re comparing a fixer-upper against a move-in-ready home that’s priced higher and want to see if the renovation route actually saves money.
- You already own your home and want to fund a remodel without a separate loan.
- Depending on the loan program, you’re purchasing an eligible investment property that needs improvements before it’s ready for occupancy or rental.
Available features vary by loan program. Depending on the product, renovation financing may be available for primary residences, second homes, or eligible investment properties. Eligible renovation projects and credit requirements also vary by program.
What to know before you start
A few things are worth understanding going in:
- Eligibility varies by loan program and property type.
- Eligible renovation projects may include kitchens, bathrooms, roofs, patios, pools, and other improvements, depending on the loan program.
- Purchase and refinance options may be available, depending on the renovation loan selected.
- Credit requirements vary by loan program and borrower qualifications.
Is a Renovation Loan right for you?
If you’ve found a home that’s close to right but not quite there, or you’re sitting in a home that needs some love, a renovation loan may help make your homebuying or renovation goals more achievable. Reach out to one of our loan officers to review your financing options and determine whether a renovation loan may be a good fit for your goals.