Your down payment would be based on the $500,000 number. With conventional renovation loans you can put as little as 5% down for primary residence, 10% for second home and 20% for investors. With FHA 203k loans (owner occupied only) you only need 3.5% down!
What is a Home Renovation Loan
A renovation loan allows you to purchase and renovate a property or refinance and renovate your current home all with one loan. With a purchase, we take the purchase price and the bid, wrap it together in one loan and you make your down payment off the final number. All appraisals are based on the value of the property after improvements.
For refinances, we pay off your existing mortgage and add the renovation money to your current loan.
What makes a renovation loan unique?
Here is the key to renovation lending. We are loaning you money based on the after-improved value of your home, not the current value. The appraisals are always completed “subject to repair” not “as-is”. The appraiser will look at the bid and the current value of the home to give us the value as if the repairs have already been made.
With conventional loans, we can loan you up to 95% of the after-improved appraised value or 95% of the purchase plus the renovations, whichever is the lower of the two. For FHA loans we can loan up to 110% of the after-improved value with as little as 3.5% down.
On refinance loans, we can loan you up to 95% of the after-improved appraised value.
So – if you own your home and want to do MAJOR RENOVATIONS – I’m not talking about new carpet and paint, I’m talking about a major home remodel, with such things as remodeling kitchens and bathrooms, doing a small addition, finishing a basement or adding that new two car-garage you’ve always wanted, then this is the loan for you!
Thinking about a cash-out refinance? Good luck, that’ll only get you up to 80% of your homes current value.
Doing a HELOC? Again, good luck. Home equity lines of credit can get you up to 90% of your homes current value but the loan is based on the rising prime rate and is a variable rate that can and likely will keep going up.
Renovation loan rates are fixed for the life of your loan IE – a 30-year fixed loan just like the loan you have now!