A renovation loan is a mortgage that allows you to buy or refinance a home that needs work and roll the renovation costs into the loan amount. A renovation loan gives homebuyers and homeowners the funds to make necessary or desirable renovations to a home or access the credit to make those changes.
Renovation loans come in various packages, including simple personal loans or government-sponsored loans to get the job done. Depending on your credit score, location, and scope of work, different renovation loan options are available.
What Are Some Popular Renovation Loan Programs?
Waymaker Mortgage offers several loan options available for financing your home remodeling project, including:
FHA 203(k) Standard and Limited Loans
With these loans, you can borrow up to 96.5% of the appraised value – based on the home’s value when the improvements or repairs are completed – to purchase (or refinance) a home and complete the work.
Conventional HomeStyle Renovation Loan
With a Homestyle Renovation mortgage, you can purchase a house, fix it up, or refinance your existing mortgage and receive funds to pay for the repairs, remodeling, renovations, or energy-efficient improvements.
VA Renovation Loan
The program offers no money down financing that covers the current value of the property, plus the cost of remodeling and repairs. It is typically intended for minor home projects, with no minimum or maximum renovation cost requirement.
USDA Renovation Loan
Great for borrowers in rural areas, this loan combines your home purchase and renovations into one mortgage, with up to 100% financing on the “As-Improved” value. This provides you with more options and allows you to purchase a home you love, even if it needs some work.
Why Consider a Renovation Loan?
Borrowing money to renovate your home with a project that will reduce your long-term costs or increase your property’s value could be a smart move. Some renovation projects can increase your property’s value by a greater amount than what you spend on renovations. Such remodeling projects, like attic insulation, basements, bathrooms, and kitchens, count as valuable repairs that could certainly improve the value of your home.
A renovation loan could also be the right choice if the project will save you money in the long run or make your home a safer place, like roof repairs, new siding, or updated windows to keep your home weatherproof and energy-efficient.