Renovate for the Home you Want
So, you are ready to buy a house and you’re going out every weekend touring homes, attending open houses, and just driving through neighborhoods…but nothing is standing out as ‘the one’.
Living in northeast Ohio, I see this all the time. We have an aging housing stock, 95% of which is 25 years or older. These homes have plenty of awesome character, but sometimes those homes can be lacking in modern amenities. Renovating a home can be a great way to get the perfect home out of a property that has a few ‘but’ qualities. What do I mean by that?
“This house is in the neighborhood we want to move to, has plenty of space, and we love the woodwork inside, but…”
‘But’ qualities can be simple things like old carpets, paint colors you don’t like, and general wear and tear of a house that’s been lived in. They can also be big things like water heaters, drafty windows, and a leaky roof. Buying a house like this and taking on that work by yourself can take care of those ‘but’ qualities…however, you will likely incur a mountain of consumer debt getting that work done.
Renovation mortgage loans offer a great alternative that will help you get your perfect home without having to max out your credit card to a home repair store. You might even get a little instant positive equity after the repairs are made.
How Does it Work?
Instead of a traditional mortgage, which requires a home to meet certain health and safety criteria, a renovation mortgage allows you to purchase a home that is in a particular state of disrepair (the aforementioned ‘but’ qualities). In our area, this is a huge benefit because it allows you to consider those older homes you might have otherwise passed up.
With a renovation loan, the costs of the repairs are included in your mortgage, so you can pay for them over time instead of accruing consumer debt that could negatively impact your credit score.
In addition to expanding your pool of potential homes, other benefits include:
- Lower down payments, which is great if you can’t put down 20-30%
- Replacing old amenities prior to close, like HVAC and water heaters, helps you avoid huge repair bills later
- Renovation loans are based on after-repair value, letting you maximize its potential, potentially building instant positive equity
- Some lenders incentivize buyers to make as many energy efficient upgrades as possible, helping you save money and increase the home’s resale value
- Renovating a home improves the neighborhood, which increases the value of surrounding homes
Current homeowners looking to renovate can refinance their mortgage with a renovation loan as well. This can help increase a home’s resale value for when it’s time to list your current property.