There's more than one type of home loan available. Each product is uniquely suited to different circumstances and can help out in ways you may not expect. A renovation loan is one of these specialized mortgage offerings, designed to cover the costs associated with fixing up a home. Such a loan can help out in a few different ways, assisting you in buying a fixer-upper and getting it into top condition, or transforming your current residence for more value, visual appeal or pure comfort and livability.
If you've never considered a renovation loan, it's worth pondering the benefits, and if you have, now's a great time to learn more. The following are a few of the key points that make these mortgages unique, along with a few great ways to use them.
Fixing Up Your Home
When your house is showing its age or wearing down, there's ample reason to take action and fix it, whether you're planning to leave soon or stay for decades to come. Putting a recently renovated and well-kept home on the market is a great way to impress and entice potential buyers. Consider, too, how much nicer it is to live in a house with comfortable and recently improved bathrooms, kitchens and bedrooms than outdated or broken-down spaces.
Refinancing your mortgage through a renovation loan is a great way to get the funds you need for construction, whether you want to add a new bedroom, completely revise your kitchen or change up the fixtures in your bathrooms. New windows, plumbing and kitchen appliances can preserve heat, reduce water use and cut power consumption, respectively, helping your renovation decision pay off.
Finding a Market Bargain
Looking for homes selling for well under market value is a tall order today, but it's not impossible. One valuable strategy is to look at properties in less than pristine condition, then commit to fixing them up via a renovation loan. Not only does this approach allow you to find bargains, but it also widens your view in general. Are you targeting a specific town, neighborhood or type of house? The right fit for you may be there - just in need of some work.
A renovation mortgage gives you the funds you need to make necessary changes to your new home, turning your new find into the dream home you envision. You get to buy the house and finance the revisions on a single loan, rather than applying twice.
Working with the FHA
Are you in the market for an affordable, approachable home loan? Federal Housing Authority partners offer programs such as the 203(k) mortgage, which lets borrowers finance $35,000 in repairs and renovations. Making a home ready for occupancy is one possible use of the loan, as is renovating a home and boosting its equity.
If you've renovated your home significantly enough, the equity in the property may be great enough to refinance into a new type of loan, one that won't impose extra costs such as mortgage insurance.
No matter where you are in your homebuying or homeownership journey, a renovation loan is an option worth considering for your current or future residence.
Source: FHA
