Your travel search
stops right here
with us

Unlocking Potential: A Guide to Refurbishment Loans for Property Investors

Whether you are buying a fixer upper or planning to make renovations to your current home, there are many options available to finance these expenses. Refurbishment loans are a financing option that is typically tailored to the specific work you plan on doing and can offer lower interest rates than typical mortgages or home equity loan products. They can be especially useful for those who are unable to meet the credit or debt-to-income requirements of other types of home improvement loans, such as a cash-out refinance or home equity loan.

Refurbishment loans are based on the after-repair value of your property, which is determined by an appraiser. The amount you can borrow is based on this valuation, along with the cost of your renovations. This type of loan works best for those who are planning to do extensive work that will increase their home’s value. It is also an excellent choice for those who have already built a significant amount of equity and want to avoid the higher rate of refinance loans.

Some refurbishment loans require collateral such as your home, while others may only require a good credit history and a solid debt-to-income ratio. It is important to understand the pros and cons of each type before deciding which one is best for your project.

Single-close construction loan

A single-close construction loan is a special type of refinance that replaces your existing mortgage with a new mortgage based on the after-repair home value. It allows you to make payments on a milestone-based disbursement schedule and requires regular inspections by the lender. This type of loan can work well if you are planning to do extensive construction and have accurate estimates from contractors.

FHA rehab loan

FHA rehab loans combine your new purchase and renovation costs into a single mortgage, which can save on closing costs and interest rates. These loans are ideal for those looking to buy a fixer upper or if you need to make structural changes to your home after a natural disaster.

Jumbo renovation loan

A jumbo renovation loan can provide the funds you need to make major repairs and upgrades to an investment property. They function similar to a traditional home equity loan or line of credit, but are typically only provided on higher-priced properties. The renovations you do must add value to the property in order to qualify, and you will need to have excellent credit to qualify for this type of loan.

Traditional cash-out refinance

A traditional cash-out refinance can give you a lump sum that you can use for whatever you want, including renovations to your primary residence. This option is not ideal for those who are planning to sell the property soon, as it can reset your mortgage rate. It is also not as flexible as other options, such as the FHA 203k or Fannie Mae Homestyle loans detailed above. If you are considering a traditional refinance, it is essential to check the loan limits in your area before getting started.

Leave a Comment

Your email address will not be published. Required fields are marked *