Is a Purchase-Plus Improvement Mortgage a Viable Option for a Home Renovation Loan?
Homeowners have many options for obtaining the funds needed to renovate their properties – such as home equity loans, home equity lines of credit, personal loans, and mortgage refinancing. But what if you plan to purchase a home that needs fixing up? In this case, there is another frequently overlooked home renovation loan option: a purchase-plus improvement mortgage.
A purchase-plus improvement mortgage allows home buyers to borrow up to 10 percent of the purchase price to a maximum of $40,000.00 for home improvements. Purchase-plus improvement mortgages typically carry lower interest rates than credit cards, lines of credit, and other home renovation loan options.
How a Purchase-Plus Improvement Mortgage Works
Let's say you're planning to purchase a home for $250,000, and the renovations you plan to complete on the home would increase the property value to $275,000. You can apply for an extra $25,000.00 to be added to your mortgage, making the total amount that you can borrow $275,000 less your required down payment. This home renovation loan, is a great way to finance your dream kitchen in an otherwise perfect home for you.
How to Obtain a Purchase-Plus Improvement Mortgage
Your lender must approve of the amount you wish to borrow to make improvements on the home you're buying. They will require quotes from a contractor for the desired improvements prior to approving the application. Once your home renovation loan is approved, the extra money is kept in trust until the agreed-upon improvements have been completed. After the work has been completed and appraised, the funds will be released to you.
Still not sure if a purchase-plus improvement mortgage is the best way to obtain the home improvement funds you need? We can help. Contact us for more information about whether this type of home renovation loan is right for you.Request Mortgage Info