What makes a Renovation Loan different?
With Conventional Mortgages the lender will not close the loan and release the mortgage proceeds unless the condition and the value of the property provide adequate loan security. This is generally not a problem, as most houses are put on the market in a condition which is acceptable to the lender.
However, a house in need of substantial repairs will not qualify as adequate security. Here's the beauty of a Renovation Loan. With a Renovation Loan, the home buyer will get one mortgage to finance both the acquisition and the renovation of the property. The loan will be based on the higher value of the property after the renovation is complete.
How does a Renovation Loan make things easier for me?
When a home buyer wants to purchase a property in need of repair or modernization, the home buyer usually has to obtain financing first to purchase the dwelling; additional financing to do the renovation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods.
A Renovation Loan removes all this detail and work and allows you to focus on what's important to you, creating the home you want.