/PROGRAM

Renovation loans

A house that needs work is a chicken-and-egg problem: a conventional lender will not lend on it in its current condition, and you cannot fix it until you own it. The usual answer is cash for the rehab or two separate loans with two sets of costs.

One loan covering the purchase price and the renovation budget together. It closes before the work starts and pays the contractor in draws as it gets done. It is sized on what the property will be worth once the work is finished rather than on what it is worth today.

Renovation programs vary more between investors than almost anything else I place, and eligibility depends heavily on the scope of work. Send the bid early. It decides which programs are even open to you.

Who a renovation loan is for

Buyer of a house that won’t pass as-is

Dated systems, a failed roof or a missing kitchen, the things that make a standard lender decline the appraisal.

Owner renovating in place

Already in the home, wants the project financed against the finished value instead of a credit line.

Investor doing a hold-and-improve

Buying a rental that needs work and intending to keep it, so a short-term bridge and a second refinance is the expensive route.

Buyer competing with cash

Losing to cash offers on distressed listings that other financed buyers cannot use at all.

How a renovation loan works

Send the property, the purchase price if you are buying, and a contractor bid or a written scope of work.
The file is underwritten on the after-completion value, so the scope and the bid matter as much as the property.
Occupancy decides the lane: a home you will live in is a consumer loan in select states; a rental you will hold is business-purpose and available in nearly every state.
The renovation money is held back and released to the contractor in draws as work is inspected and completed.

Questions about a renovation loan

Can I do the work myself?

Usually not, or only in a narrow way. Most renovation programs want a licensed contractor of record because the draws and inspections are built around one. Tell me upfront if you were planning to self-perform. It changes which programs are open.

How is this different from a fix & flip loan?

A fix & flip loan is short-term money you refinance or sell out of. This is one permanent loan that already includes the rehab, so there is no second closing at the end. If you are selling in months rather than holding, the bridge is usually the better tool.

Do I get the renovation money at closing?

No. It sits in a draw account and is released as the work is completed and verified. That is what lets the lender lend against the finished value before the work exists.

What if the contractor goes over budget?

That is why the bid is underwritten upfront and why a contingency is normally built in. Overruns beyond it usually come out of pocket, so a realistic scope at the start protects you more than anything else.

Next step

Send this scenario

Tell me the property and the plan and I’ll come back with what’s eligible. Eligibility and terms vary by scenario.

Let’s find your path

Draft copy, pending review by adscompliance@nexalending.com before publication.

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