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Home Remodel Loans How To

An under construction rural home

Say that you find the perfect property, but the current house is not your dream home. What do you do?

Home remodel loans are unique in that they allow you to purchase the property and roll in those remodeling costs, so that you can create your dream home all under one loan. Remodel loans are specifically for remodels that don’t increase your  square footage. If you want to add an additional room, or in-law suite, we can discuss a construction loan instead.

How to determine your loan total

Let’s use an example.

You purchase the property, you hire a contractor, you roll the funds into the loan, and we can then lend up to 85% of the appraised value. Or, if you are more left-brained:

Property Cost + Contractor Cost + Renovation Costs = Total Cost

Appraised Value × 85% (0.85) = Highest loan available for your situation

You might be wondering, what if you already own your property? Easy, if you own it outright, we’re able to use 15% of that equity as all or a partial down payment.* If there is equity in the property, that equity can be used towards the down payment requirement.

We also simplify work with your contractor through our online construction tool. We set your builder up in the portal, where they can withdraw the funds as needed. We typically get a draw schedule, then they request funds. We also have your back by completing an inspection every quarter percent of completion to make sure they are being good stewards of the funds and completing the work as promised.

How you save

Our rates are competitive, and we offer a conversion program that allows you to modify your rate down the line. If you make 12 months of consecutive payments, your loan is eligible for our conversion program. So, if your original rate was 6.4%, but a year later, rates are down to 5.8%, you can save money in the long run.**

This is a true 30-year loan, where you’ll only pay interest on what has been disbursed. Unlike a traditional bank that charges interest on the total loan amount from day one, you’ll only pay interest on funds that have been disbursed, reducing your total costs over the lifetime of the loan.

Your permanent loan starts when you close, unlike other banks that may require a full year of paid interest up front. So, you’ll pay principal plus interest on drawn totals, with your fixed 30-year rate.

While we cannot add to an existing loan, if your renovations end up costing less than expected we will take that out of your principle, and re-amortize the balance so you are not responsible for unused funds.

Your next steps

To begin a remodel loan, you’ll need:

  • A written quote from a general contractor
  • House plans, elevations, and any improvements that will be rolled into the loan

Even though you’re ready to start the process and get a loan, it’s always a good idea to speak with a lender before beginning any remodel project. You’ll want to understand what your options are and what type of loan you’re comfortable with. When you’re ready to begin, reach out to our team so an expert loan officer can begin helping make your dream home a reality.

*A $200,000 loan would require a 15% down payment with a monthly principal and interest payment of $1,297.20 for 360 months based on 7.065% annual percentage rate (APR). Assumes $6,293 in closing costs. Monthly payments do not include amounts for taxes and insurance premiums so the actual monthly payment will be greater if an escrow account is established. Available rates and terms including the APR are subject to change without notice. The APR is based on the best available interest rate as of 02/01/2024.

**Provided that eligibility requirements are met. Conversion has a one-time fee of $750.00. Terms and Conditions may apply. The fee is subject to change without notice.

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