Can You Add Renovation Costs To A Mortgage?

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Homeowners have many different options when renovation costs exceed their savings, but they don’t need to put off crucial work when they can’t afford it right away. Lines of credit and credit cards are common options, though the often exorbitant interest rates make these tough choices. If you already have a mortgage, the last thing you probably want is another thing to pay off.

To avoid adding new avenues of debt to your life, there are several options you have when looking to work renovations into the mortgage, both for soon-to-be and existing homeowners.  

Mortgage Refinancing

One option for existing homeowners is mortgage refinancing. This might offer them some advantages as they look to finish large-scale renovations, because they may have access to better interest rates than they would through a credit card or loan. With mortgage refinancing, the financial institution appraises the home and considers how much the homeowners still owe on the house, letting them borrow up to 80% of the value.

It is important for homeowners to recognize that to qualify for renovation mortgage financing, the costs of the projects must line up with the value (or potential value) of the home and property. Your financial institution can walk you through the options, but know that refinancing the mortgage often comes with set-up costs, and repayment is spread over a lengthy period of time.


Renovation Mortgage Financing

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An attractive option for people just purchasing a new home is renovation mortgage financing. With this, the homebuyer assumes the renovation costs into their mortgage, and they can pay for much-needed renovations at a lower interest rate before they settle into the new home.

It’s simple application: when you apply for a mortgage with a financial institution, you should include an estimate of all the costs associated with the renovations you have planned, and add those to the final number. This can be a very smart option for first-time homebuyers who do not have enough saved up to make renovations after the purchase of the house. 


Why Build Renovation Costs Into The Mortgage?

Not all renovations are cosmetic. Many are absolutely necessary if you want to prevent damage (or further damage) to a home. If a new buyer notices an issue with the roof or the foundation on a home that is otherwise perfect, they probably won’t have the savings to take on these projects. They can’t leave them alone either, because these problems can become substantially worse – and substantially more costly to fix – over time. 

While some renovations aren’t necessary, they can add value to the home, and some projects have a greater return on investment than others. Whether you are in the process of purchasing a home or already own it, try and gauge what parts of the home are worth investing in and order them by priority. Upgraded windows and doors, new HVAC systems, and kitchen and bathroom renos can add significantly to your home and take off more of your bills.