What is a renovation mortgage?
The term “renovation mortgage” refers to a loan secured against real estate for the purpose of renovations. The amount, rate, length, and other terms of the loan depend on the type of renovation mortgage loan you get.
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If you’re wondering can I get a mortgage with extra money for renovations when buying a home? or can I use a mortgage for renovations of our current home?’ the short answer is maybe.
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Essentially - each situation is a little different. Your home equity, market value of the home, your own financial situation, all these factors come into play with mortgage renovation financing.
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Your first step involves deciding what you need or want to do. Next, you’ll need to get an estimate on how much it costs. This can help you narrow down your renovation mortgage financing options and see how a renovation mortgage loan could work in your situation.
Benefits of a home reno mortgage
A mortgage isn’t the only way to finance home repairs or renovations. Other alternative financing options for home renovations include:
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Using your savings to update your home without going into debt
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Using a credit card
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An unsecured credit line
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A secured credit line (home equity line of credit or HELOC)
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A personal loan
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A loan from a family member
Some of these home renovation finance options are appealing because they’re convenient and quick to set up and access. However, if you’re planning a more extensive renovation project, a home renovation mortgage loan can offer the following benefits:
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Lower interest rates
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Lower monthly payments as the loan gets amortized over a longer period
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Access to a higher amount depending on your home equity
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A good option for borrowers who might feel tempted to abuse the flexibility of other home renovation options mentioned above - such as credit lines or credit cards