RENOVATION LOANS
Financing Home Improvements as Part of Your Mortgage Strategy
A major renovation can change how you use your home, improve its condition, or make a property better suited to your long-term needs. But significant improvements can also require a different financing approach than a traditional mortgage or smaller home improvement project.
Renovation loans may allow qualified borrowers to finance eligible improvements to an existing property. Depending on the program, renovation financing may be available when purchasing a home that needs work or when improving a property you already own.
Platinum Lending Solutions helps borrowers throughout Oregon and Washington evaluate renovation financing options and determine how the cost of planned improvements may fit into the overall mortgage strategy.
What Is a Renovation Loan?
A renovation loan is financing designed to account for both the property and eligible improvements being made to it.
Unlike a traditional mortgage, which generally evaluates a home in its current condition, certain renovation programs may consider the planned improvements and the property’s expected value after those improvements are completed.
Depending on the program and transaction, renovation financing may be used to:
• Purchase a home and complete eligible renovations
• Renovate a home you already own
• Complete major repairs or improvements
• Modernize an older property
• Make structural or functional improvements
• Complete substantial whole-home renovations
Because the lender is financing a property that will be improved after closing, renovation loans typically involve additional requirements related to the project, contractor, budget, appraisal, and distribution of renovation funds.
What Types of Improvements Can Be Financed?
Eligible improvements vary by loan program, but renovation financing may potentially be used for projects such as:
Kitchen Renovations
Bathroom Renovations
Home Additions
Structural Repairs or Improvements
Accessibility Modifications
Energy-Efficiency Improvements
Major System Updates
Significant Interior or Exterior Improvements
Whole-Home Renovations
Each renovation program establishes its own rules regarding eligible improvements.
The scope of your project should therefore be reviewed before selecting the financing rather than assuming every renovation loan will cover the same work.
Buying a Home That Needs Renovation
Renovation financing can be particularly useful when purchasing a home that needs significant improvements.
With certain programs, qualified borrowers may be able to finance both the purchase of the property and eligible renovation costs within the same overall financing structure.
This can allow buyers to consider properties based on what they could become after renovation rather than limiting their search exclusively to homes that are already move-in ready.
However, properties requiring substantial repairs can present additional financing considerations.
The proposed work, contractor, budget, property condition, appraisal, and applicable loan requirements all need to work together.
If you are specifically considering a property that may not qualify for traditional mortgage financing in its current condition, you may also want to explore Fixer-Upper Financing →
Renovating a Home You Already Own
Renovation financing may also be available for homeowners planning substantial improvements to a property they already own.
The appropriate financing structure can depend on several factors, including:
• Current mortgage balance and terms
• Available home equity
• Scope and cost of the renovation
• Expected value after improvements
• Borrower qualifications
• Available renovation programs
• Longer-term plans for the property
For an existing homeowner, the question is not simply whether a renovation loan is available.
It is also whether changing the existing mortgage makes sense as part of the overall financing strategy.
Depending on the circumstances, renovation financing should be compared with other potential ways of accessing funds for improvements.
How Does a Renovation Loan Work?
Although requirements vary by lender and program, renovation financing generally requires the lender to evaluate both the mortgage transaction and the proposed project.
The process may include review of:
01
Borrower Qualifications
Income, employment, assets, credit, existing obligations, available funds, and applicable reserve requirements may all be considered.
02
Property
The lender evaluates the existing property and its eligibility for the selected renovation program.
03
Scope of Work
The planned improvements generally need to be clearly defined before the financing is finalized.
04
Contractor
Many renovation programs have specific requirements for the contractor completing the work.
05
Renovation Budget
The lender may require detailed estimates, contracts, and other documentation establishing the expected cost of the improvements.
06
Appraisal
Depending on the program, the appraisal may consider the property’s expected value after the planned renovations have been completed.
07
Renovation Funds
Funds designated for renovation are generally controlled and released according to the requirements of the loan program rather than simply being provided to the borrower at closing.
How Are Renovation Funds Distributed?
Renovation funds are commonly released through a draw process as work progresses.
The exact procedure depends on the lender and program, but funds may be distributed after designated portions of the renovation have been completed and applicable requirements have been satisfied.
Inspections or other documentation may be required before funds are released.
This means the renovation budget and contractor should be evaluated alongside the financing from the beginning.
Understanding how and when funds will become available can help avoid problems once work is underway.
Contractor Requirements
Many renovation mortgage programs have requirements regarding who can complete the improvements.
Depending on the financing, the lender may review information about the contractor and require documentation related to the proposed work, costs, licensing, insurance, contracts, or other qualifications.
Owner-completed work may be restricted under certain programs.
Because contractor requirements can vary significantly, it is helpful to understand the financing requirements before finalizing your contractor arrangements.
How Is a Renovation Property Appraised?
A renovation loan may require an appraisal that considers the property after the planned improvements are completed, subject to the requirements of the applicable loan program.
The appraiser may review the existing property along with plans, specifications, estimates, and the proposed scope of work to develop an opinion of the expected completed value.
This can make the appraisal process different from a traditional mortgage appraisal, which primarily evaluates a property in its existing condition.
The expected completed value can be an important part of determining how the renovation financing is structured.
Renovation Loans vs. Traditional Mortgages
A traditional mortgage generally finances a property based on its existing condition.
That can create challenges when a home requires substantial work or when the borrower wants the cost of improvements considered as part of the financing.
Renovation financing is designed to address the property and planned improvements together.
As a result, the lender may need to evaluate additional components such as:
• Proposed improvements
• Contractor qualifications
• Renovation contracts and estimates
• Project budget
• Timeline
• Draw schedule
• Inspections
• Expected completed value
This additional review makes renovation financing more involved than a standard mortgage, but it may provide a financing option for projects that a traditional mortgage is not designed to accommodate.
Renovation Loan vs. Fixer-Upper Financing
These terms can overlap, but they are useful for describing two different borrower situations.
Renovation Financing
Renovation financing is the broader category. It can include financing improvements to a home you already own as well as purchasing a property that will be renovated.
Fixer-Upper Financing
Fixer-upper financing is specifically focused on purchasing a property that needs repairs or substantial improvements, particularly when the property’s current condition creates challenges for traditional mortgage financing.
If you already own the property, this Renovation Loans page is the more relevant starting point.
If you are shopping for a home that needs significant work, Explore Fixer-Upper Financing →
Renovation Financing and Your Existing Mortgage
For homeowners, one of the most important considerations is how renovation financing affects an existing mortgage.
If obtaining the renovation financing requires replacing your current mortgage, the entire transaction should be evaluated — not just the amount of money needed for the project.
Factors such as the existing loan balance, current mortgage terms, available equity, proposed new financing, project cost, and longer-term plans for the home may all matter.
The goal should be to determine whether the overall financing structure makes sense, rather than evaluating the renovation funds in isolation.
Start With Financing Before Finalizing the Renovation
For a substantial renovation, it can be helpful to explore financing before signing final contracts or committing significant funds to the project.
Understanding your financing options early may help establish:
• A realistic renovation budget
• Potential cash or equity requirements
• Which improvements may be eligible
• Contractor requirements
• Documentation requirements
• How the appraisal may work
• How renovation funds will be distributed
• How the financing may affect your existing mortgage
It may also identify financing limitations while there is still time to adjust the scope or structure of the project.
Renovation Loans in Oregon & Washington
Renovation projects can vary considerably based on the property, location, scope of work, contractor, costs, and financing needs.
As an independent mortgage brokerage serving Oregon and Washington, Platinum Lending Solutions can evaluate renovation financing through multiple lending sources rather than limiting borrowers to the programs available from a single lender.
We can help you understand the available financing structures, compare appropriate options, and determine which approach may align with the property, renovation project, and your longer-term mortgage goals.
Renovation Loan FAQs
Can I include renovation costs when purchasing a home?
Certain renovation mortgage programs may allow qualified borrowers to finance both the purchase of a property and eligible renovation costs within the same overall financing structure.
Can I use a renovation loan on a home I already own?
Potentially. Renovation financing may be available for qualified homeowners completing eligible improvements to an existing property. The appropriate structure may depend on your current mortgage, available equity, project, and loan program.
What types of renovations can be financed?
Eligible improvements vary by program. Depending on the financing, renovation loans may potentially cover projects such as kitchens, bathrooms, additions, structural improvements, accessibility modifications, energy-efficiency improvements, major systems, and whole-home renovations.
Can I use renovation financing for cosmetic improvements?
It depends on the loan program and the proposed scope of work. Programs vary significantly in which improvements are permitted, so the project should be reviewed before selecting a financing structure.
Do I receive all of the renovation money at closing?
Renovation funds are generally controlled and distributed according to the requirements of the loan program. Funds may be released through a draw process as eligible work is completed.
Does my contractor need to be approved?
Many renovation loan programs have contractor requirements. The specific documentation and approval process vary by program and lender.
Can I complete the renovation work myself?
Some programs restrict owner-completed work or require eligible improvements to be completed by qualified contractors. This should be determined before selecting a renovation loan.
How is the home appraised before the renovation is finished?
Depending on the program, the appraisal may consider the property’s expected completed value based on the existing property and proposed improvements.
Is a renovation loan the same as a home equity loan?
No. Renovation mortgage programs and home equity financing are different financing structures. For homeowners who already own the property, the available options should be compared based on the existing mortgage, equity, renovation project, and overall financial goals.
Planning a Major Home Renovation?
Whether you are buying a home that needs work or making substantial improvements to a property you already own, the financing should be considered early in the planning process.
Platinum Lending Solutions can help you evaluate renovation loan options, understand how the project may affect the financing, and determine which structures may be appropriate before you move forward.
Have Questions About Your Renovation Loan Options?
Tell us a little about the property and the improvements you are considering. We can help you evaluate potential financing options and determine what steps to consider next.
