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Home Mortgages that Include Renovation Costs

Updated: Sep 28


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Can Costs of Renovation Be Included in a Mortgage?

If your house wasn’t recently renovated, you may be in need of renovations and repairs to move into your home. The combination of moving from your old residence, placing a down payment on your new home, and paying for renovations can feel overwhelming…. maybe even anxiety inducing.

Repairs and cosmetic improvement pricing can add up quickly, which can leave you wondering if these renovation costs can be added to a mortgage. It would be a lot easier to roll the cost of renovations into your monthly mortgage and pay for it over time. Can this be an option? The answer is yes…but let’s take a closer look.


Including home improvement costs to a mortgage is possible. Instead of having two loans (one for your mortgage and the other for repairs/upgrades), you can pay off one over the same 15- or 30-year period that is allowed with a traditional mortgage. But this does not mean that you have 15 or 30 years to complete your renovations. Usually, they must be completed within a 6-to-12-month period of closing and must be based on a scope of work that is approved by your bank. This ensures that the money provided for repairs to your home will be used as intended. Mortgages that account for renovation costs under one loan can be helpful for home buyers. Lett’s take a closer look at the process so you can have a better understanding of how it works and what can be expected.



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Adding Renovation Costs to a Mortgage

Home renovation mortgages are not as well-known as other types of loans and not every lender offers them. When you find a lender that does offer them, this is what the application process should look like:

  • The lender will assess your income, status of employment, credit score, and other potential factors to see if you qualify.

  • If you qualify, you will be responsible for finding a reputable contractor (like Project Build Construction & Interiors), having the contractor approved by your bank, and then getting a bid for your renovation.

  • The lender then pays a visit to your new home to determine the as-is-value and how much it will be worth after the renovations are completed.

  • With the new value of your home in mind, the bank will then set a limit for how much you are able to borrow to complete your renovations.

The two most popular options for including home improvement costs to a mortgage are FHA 203k loans and Fannie Mae Homestyle loans. You are able to borrow based upon the improved value of your property, unlike other options. This may mean that you will be granted a higher loan amount so that you are able to pay less out-of-pocket.


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What You Should Know About a Home Renovation Mortgage

Here are other upsides of adding renovation costs to your mortgage:

  • You may be able have a smaller down payment

  • Your interest rates could potentially be lower than a traditional loan

  • Your interest may be tax-deductible

Here are the downsides of adding renovation costs to your mortgage:

  • A challenge for homeowners is to find a reputable and reliable contractor

  • The best route is to hire a general contractor who can provide all the trades needed in the renovation, manage timelines, work with homeowners and their budget, and produce quality work.

  • Having your renovation mortgage loan approved can take longer than a traditional mortgage

  • This is due to contractors being involved. As mentioned prior, you need to source a reputable general contractor, make sure that they are approved by your bank, receive a bid, and wait for the lender’s offer. Project Build Construction & Interiors is a reliable source for updates prior to moving in and provides quick and easy proposals to aid in speeding up this process.

  • You will have to pay cash for unexpected expenses or additions to scope

  • If you want to upgrade materials or add to the scope of work, you unfortunately are unable to add the costs to your balance with the bank. In addition to the renovation costs anticipated, you should set aside at least 15% for unforeseen additional work. Should homeowners want to upgrade finished materials, costs of such will come out of their own pocket.

Should you choose to go with a home renovation mortgage, Project Build Construction & Interiors is the best home improvement company to get the job done! We see to every detail and get the job done quickly and efficiently. We vet and hire tradesmen so that you don’t have to play phone tag with contractors. We remove the usual stress and uncertainty out of pre-move-in updates and simplify the process. We even offer financing.



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