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Can You Add Renovation Costs to a Mortgage?

Unless your home is a new-build or was recently renovated, you may need some repairs and renovations to get it move-in ready. But between the expenses of moving from your old place and paying the down payment on your new home, the thought of paying for renovations can be…scary. 

The cost of repairs and cosmetic improvements can quickly add up, which leaves many people asking, “Can you add renovation costs to a mortgage?” After all, it’d be so much easier if you could pay for your renovations over time as you pay off your mortgage. Is this an option, though? The short answer is yes—but let’s dive into the details!

Can you include renovation costs to a mortgage?

Yes! Adding home improvement costs to a mortgage is possible. This means that instead of keeping up with two loans—one for your mortgage and one for repairs and upgrades—you can pay off just one over the same 15 or 30 year period that’s allowed with a traditional mortgage.

This doesn’t mean that you have 15 or 30 years to make your renovations, though. Typically, they must be completed within 6-12 months of closing and need to be based on a predetermined scope of work approved by your bank. This is just a precaution to ensure that money provided for repairs to your home is used as intended.

That timeline aside, a mortgage that accounts for renovation costs under a single loan can be a big help for recent home buyers. Let’s take a look at the process so you can understand how it works and what you can expect.

The process of adding renovation costs to a mortgage

The home renovation mortgage isn’t as well-known as other types of loans, and not all lenders offer them. However, when you find one that does, the application process should look something like this: 

  • The lender will look into your income, employment status, credit score, and potentially some other factors to see if you meet their eligibility criteria. 
  • If you meet the criteria, you’ll be responsible for finding a reputable contractor (like Curbio), getting that contractor approved by your bank, and then getting a bid for your renovation project. 
  • The lender will pay a visit to your new house to determine its as-is value and how much it would be worth after the changes you’re planning to make. 
  • With the after-renovation value of your house in mind, the bank will set a limit for how much you can borrow to complete the project. 

Two of the most popular options for adding home improvement costs to a mortgage are FHA 203K loans and Fannie Mae HomeStyle loans. Unlike other options, both allow you to borrow based on the improved value of your property. This means you may be granted a higher loan amount so that you can pay less out-of-pocket (if anything).

Now that you understand the process, let’s take a look at the pros and cons of a home renovation mortgage.

What you should know about a home renovation mortgage

Besides the obvious advantage of having to pay little to nothing out-of-pocket for renovations to get your new home move-in ready, there are some other upsides.

  • You may be able to make a smaller down payment than you otherwise could
  • Your interest rates may be lower than with a traditional loan
  • Your interest may even be tax-deductible

These are all great reasons to consider combining your mortgage and renovation costs. However, there are some downsides that you should be aware of too.

1. It can also be difficult to find willing contractors
Before the first draw with the bank, they’d need to front the cash for materials and labor, which many contractors are hesitant to do.

Luckily, with Curbio, this isn’t an issue. We defer pre-move-in home improvements until we finish the job, which makes it easy for any new buyer to update their new home. Renovation mortgage or not, we make it easy to get repairs done quickly so that you can settle into your home ASAP.

2. Getting your renovation mortgage loan approved can take longer than a traditional mortgage
This is due to a third party—a contractor—being involved. As mentioned, you need to source the contractor, make sure they’re approved by your bank, get the contractor’s bid, and wait for the lender’s offer. As a national company, Curbio’s a reliable source for pre-move-in updates and we provide quick and easy proposals to help speed this process up!

3. You’ll have to pay cash for any unexpected expenses or additions to scope
If you want to add to your scope of work or upgrade materials, unfortunately the added costs cannot be added to your balance with the bank. It’s best to put aside a little extra cash to avoid stressing over surprises and upgrades.

If you choose to go with a home renovation mortgage, Curbio is the best home improvement company to get the job done! We tackle work quickly and see to every single detail from proposal to punchlist. This includes vetting and hiring subcontractors, so you aren’t stuck playing phone tag with contractors. Simply put, we take the usual stress and uncertainty out of pre-move-in updates and simplify the process with deferred payment.