RENOVATION LOANS
Financing Home Improvements as Part of Your Mortgage Strategy
A major renovation can improve your home’s condition and how you use it. Larger projects may need a different type of financing than a standard mortgage or small home improvement loan.
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 in Oregon and Washington compare renovation loans. We review how the project cost fits your mortgage and long-term plans.
What Is a Renovation Loan?
A renovation loan can finance a home and eligible repairs or improvements together.
A traditional mortgage generally evaluates the home as it is today. Some renovation programs also consider the planned work and the home’s expected value after it is finished.
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
The lender is financing work that will take place after closing. Renovation loans therefore typically have extra requirements for the project, contractor, budget and appraisal. There are also rules for how renovation funds are released.
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.
Review your planned work before choosing a loan. Each program covers different types of improvements.
Buying a Home That Needs Renovation
Renovation financing may help you buy a home that needs major work.
Some programs let qualified borrowers finance the home purchase and eligible repairs together.
This may let you consider homes that need work, based on what they could become after repairs.
A home that needs major repairs may need a closer loan review.
The proposed work, contractor, budget, property condition, appraisal, and applicable loan requirements all need to work together.
If you are buying a home to live in and it needs significant repairs, ask us to review whether an owner-occupied purchase-with-renovation mortgage could finance the property and eligible work together. The property’s current condition, project budget and contractor requirements affect which programs may fit.
Renovating a Home You Already Own
You may also be able to use a renovation loan to improve a home you 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?
The lender generally reviews both the home loan and the planned work. The exact rules vary by lender and program.
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 process depends on the lender and program. Funds may be released after each stage of work is finished and the lender’s requirements are met.
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.
The lender may review the contractor’s licenses, insurance and other qualifications. It may also require plans, cost estimates and contracts for the work. Requirements depend on the financing.
Owner-completed work may be restricted under certain programs.
Check the loan program’s contractor rules before hiring a contractor.
How Is a Renovation Property Appraised?
A renovation loan may require an appraisal of the home’s value after the work is complete. The loan program sets the appraisal rules.
The appraiser may estimate the home’s value after the work is finished. The review may include the current property, plans, specifications, estimates and planned repairs.
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
Renovation loans need more review than standard mortgages. They may help finance projects that a traditional loan cannot cover.
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 focuses on buying a home that needs repairs. Its current condition may make a traditional mortgage difficult to obtain.
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, begin with the purchase-and-renovation options explained on this page. If instead you are acquiring a property to renovate and sell as a business investment, see our separate Fix & Flip Loans page. An investor-purpose loan is not a substitute for an owner-occupied purchase mortgage.
Renovation Financing and Your Existing Mortgage
For homeowners, one of the most important considerations is how renovation financing affects an existing mortgage.
Some renovation loans replace your current mortgage. If so, compare the full cost of the new loan with your current financing, as well as the cost of the project.
Compare your current loan balance and terms with the proposed financing. Your equity, project cost and long-term plans also 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, Platinum Lending Solutions compares renovation programs from multiple lenders. We serve Oregon and Washington.
We can explain the loan structures and help you compare options. We review how each approach fits your home, project and long-term mortgage goals.
Renovation Loan FAQs
Can I include renovation costs when purchasing a home?
Yes. Some programs let qualified buyers finance the home purchase and eligible renovation costs together.
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 work varies by program. Options may include kitchens, bathrooms, additions, structural work, accessibility changes, energy upgrades, major systems, or 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.
Related Renovation and Construction Resources
For a broader overview, explore our Construction & Renovation Loans guide. If you are building a home rather than improving an existing property, our Construction-to-Permanent Loans page explains a different financing structure. For investor projects intended for resale, see Fix & Flip Loans.
For help weighing the property itself, read Fixer-Upper vs. Move-In-Ready Home: Which Should You Buy?
Planning a Major Home Renovation?
Review financing early, whether you are buying a home that needs work or improving one you own.
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.
