There is more than one way to pay for a renovation, and the right one depends on whether you are buying or already own, how much equity you have, and how big the project is.
Who it fits
Buying a home that needs updating
Buyers purchasing a home that needs updating
FHA 203k loansKitchen, bath or addition
Owners planning a kitchen, bath, addition or systems upgrade
Cash out refinanceCash out or HELOC?
Owners with equity who want to compare cash out and HELOC
Read the comparisonImproving a rental
Investors improving a rental property
Investor loansHow it works
If you are buying, a 203k or HomeStyle loan wraps the purchase and the project into one mortgage based on the after improved value. If you already own, a cash out refinance or a HELOC may be simpler.
We compare total cost and monthly payment for each path, so the financing decision is as considered as the design.
Key facts
- FHA 203k
- Lower down payment, primary residence only
- Fannie Mae HomeStyle
- Conventional, allows second homes and investment properties
- Cash out refinance
- One new loan, uses existing equity
- HELOC
- Keeps your first mortgage in place
Common questions
Which renovation loan is best?
For buyers with a small down payment, usually the 203k. For stronger credit or a second home, HomeStyle. For owners with a low first mortgage rate, often a HELOC.
Is the loan based on today's value or the value after the work?
Renovation purchase loans use the after improved value determined by the appraiser.
How are contractors paid?
From an escrow account in draws as work is completed and inspected.
