Financing a Home Purchase That Needs Renovations
It’s often difficult to save up for your down payment and one time closing costs, let alone have extra money for home renovations. Did you know you can consolidate your purchase AND the anticipated cost of improvements into one mortgage?
It used to be that people who bought a new home with a smallish down payment would later refinance their homes, and take out equity to pay for home renovations. But now you need to have at least 25% equity in your home before there is room to refinance up to the new 80% maximum allowed loan to value ratio.
And you really don’t want to tap into your credit cards and unsecured personal lines of credit to pay for these needed home improvements.
Fortunately there are many mortgage lenders who offer a “Purchase plus Improvements” mortgage at the time you buy your home. It doesn’t have to be a huge renovation; it can be as simple as replacing carpet & installing hardwood, or perhaps adding granite countertops.
Every lender has their own way of dealing with this, but often they will limit the additional funding to $40,000 or 20% of the initial purchase price (whichever is less) And of course, the lender has to be satisfied the improvements will increase the value of the property.
Stay tuned for a far more detailed article on this topic coming soon.