Refinancing with a renovation loan can be a terrific option these days due to the virtual disappearance of constructing lending. Subject to the local county lending limit, a renovation loan pays off the existing mortgage and provides a budget for renovation costs.
The three types of renovation loans: 203k Streamline, Energy, and Full 203k can all be used for a refinance situation to cover the renovation of your existing residence.
The refinance of a home with a Renovation Loan allows the homeowner to add a budget for renovation costs to the existing loan balance of the home. After close, the funds are used to complete planned improvements to the home. This is perfect should you want to repair or update your home.
A 203k loan allows you to refinance with an FHA loan, and includes a budget for costs to to repair, renovate, and customize your home.
Rather than buying another home, you can fix up and customize your current home.
- Loan amounts up to 96.5% of the improved value of the home
- Estimates for the work to be completed must be obtained and approved as part of the loan process prior to closing
- Work must be completed within 6 months
- Renovation budget must include a 10%-20% contingency reserve depending on the type of work
Cost of a 203k renovation loan include costs associated with any FHA loan
- Up Front Mortgage Insurance of 1.75% (can be added to loan amount above the County limits)
- Monthly mortgage insurance 1.1% to 1.2% (0.250% higher for loans > $625,500)
Additional costs include inspection fees, appraisals, title inspection, etc.