Learn about the different types of home loans available for financing renovations
Education page intended to provide brief description of general loan types along with pros and cons for each
Government guaranteed loan designed to provide consumers with financing to purchase (or refinance) a property in need of renovations and to simultaneously finance the cost of the improvements in the loan.The amount of the loan is based upon the increased value of the property after the improvements are completed.
Fannie Mae HomeStyle
Similar to FHA 203K this loan allows borrowers to purchase, or refinance, a property in need of repairs or improvements, and to finance the cost of the renovations into the loan.The amount of loan is based upon the “after improved value”. This loan is considered less restrictive than FHA 203K loans on allowable and required repairs and improvements. It is available for owner-occupied, second homes and investment properties.
Home Equity Line of
Credit - HELOC
Usually referred to as a HELOC, is a revolving line of credit that is secured by residential property and used to access the existing equity in the property. It is usually a 2nd mortgage as it is obtained in addition to an existing mortgage when the borrower does not want to refinance or payoff an existing mortgage.
Home Equity Loan
A fixed loan amount and term, secured by residential property, that is used to access the existing equity in the property. Most commonly with a fixed interest rate and fixed monthly principal & interest payments. It is a 2nd mortgage used in addition to an existing mortgage when the borrower does not want to refinance or payoff the existing mortgage.
Unsecured Personal Loans
A personal loan is a lumpsum fixed loan amount given to a qualified borrower that is not secured by residential property or collateral. The amount of the loan varies between $2,500 and $100,000, and is highly dependent upon the borrower’s credit score, qualifications and ability to repay the loan. The term, or length of the loan, varies between 24 month and 72 months. The primary benefit of this type of loan is ease of application and speed.