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Renovation Lending – In Case You are Wondering…

Ever find yourself wishing your 2 bedroom, 1 bath house could become a 3 bedroom, 2 bath house? Or have you imagined remodeling your kitchen and extending that ground floor back into your deep lot? Maybe the house you bought 6 years ago is a tight squeeze now that your toddler is mobile and curious, or that ramshackle garage where you store you junk whispers, “Make me a home office.”

Renovation lending is a key to unlock your home’s potential. You can finance a house remodel – a small-budget job or more significant undertakings – using 1 of 2 different programs, each of which offers competitively priced 30-year fixed rate first mortgages as an option (the 15-year fixed rate is the other option).

Based on the drawings and plans prepared by your licensed general contractor, as well as a budget that includes actual bids for the work to be done, an appraiser will value your home based on current market conditions AND what your home will be worth once the improvements are complete. It’s a future value, and it, along with your good credit and income, will be the basis for the new loan amount.

Once your renovation loan closes, the work begins. At the completion of certain building phases – foundation, for example, or framing – a representative of the lender will meet your contractor at the house to certify that the work has been done to the approved specifications, and then funds representing that portion of the construction budget will be released. An ongoing 10% holdback of funds is kept throughout the building process. At the end, if there have not been extra expenses incurred, those funds held back will be applied toward the principal balance of your loan.

Talk about wish fulfillment – you may already be living in what can soon become your dream home! We’d be happy to discuss these programs in more detail with you.

Julia is available at jdemeter@commercemtg.com or find Melissa at mmilton@commercemtg.com.