How do Renovation Loans work?
Annette Bui | Updated July 05, 2020 | Mortgage Programs
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The purpose of renovation loans or 203k is that it
allows both homeowners and homebuyers to build the cost of doing a
rehabilitation project on a house and roll it into the mortgage. The benefit of
this program is that it makes the upgrade process more affordable without
having to incur expensive credit card interest and maxing out your debts. You
can finance the cost into your mortgage at a lower interest and have a fixed
payment. Additionally, the projected renovation updates will improve the value
of the collateral and better secures the lender's position. This is designed to
help save both time and money for homeowners to gain access to more prospective
homes rather than be limited to the homes already in good condition.
How can a Renovation Loan be used?
The scope of the rehabilitation loan covers expenses
of a minimum of $5,000 in costs and up and can be used for virtually any
upgrades to improve the home down to as much as getting it partially demolished
or razed as part of the rehabilitation as long as the current foundation is in
its original place. Furthermore, rehab loans may extend to the costs to convert the property to a one to four-unit home.
What’s Next?
The next step to finding out if a renovation loan is a good option for you is to assess what upgrades you may need and reach out to
Annette’s team to see how much you can get preapproved for. As part of our
promise to clients, we believe that homeownership is an ongoing process that
not only entails the initial process of acquiring your home but also building
the perpetual relationship so we can always be available for your annual
financial assessment or provide any guidance, educate and collaborate with our
clients.
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