Refinance to Remodel Your Home with the FHA 203k
Paying for a remodeling project can get dicey in today's housing market. Because of falling home values over the last 5 years, anyone who bought a home in the last 10 years is likely low on equity. Many homeowners just like you are actually upside down on their mortgages, meaning there's negative equity. All of this means home equity loans are hard to come by if not impossible. This is why it's vital to understand the refinance to remodel option when it comes to home improvements.
Living in a home for more than a few years usually means there's at least a few things you'd like to change. Maybe the kitchen is out of date or the carpet and other floors need a makeover. Whatever the case, home improvements are a way of life as a homeowner. But with the equity problem, paying for that kind of work is difficult at best.
There's a solution to the problem: refinance to remodel with the FHA 203k. The 203k program can help you with the purchase or refinance of a property by allowing you to roll-in the costs of repairs and improvements up to 110% of the after improved value of the home with a minimum 3.5% down payment.
This means you can pay off your current mortgage, have a new one written that includes home upgrades like that new kitchen, new carpets and floors or even building a new deck. Because it's one mortgage (up to 110% of the after improved value) you get to pay the same interest rate - and thos are extremely low right now. It's also a tax write-off because it's your mortgage interest.
Your mortgage payments and the renovation projects begin after your loan closes. You can even decide to have up to six mortgage payments put into the cost of rehabilitation if the property is not going to be occupied during construction - but it can't exceed the length of time it is estimated to complete the home improvement projects.
Instead of looking at what's eligible for financing when you refinance to remodel with the 203k, here's a look at a few items that are not covered.
- Most landscaping (or fencing)
- Work that will not start within 30 days of loan closing or will cause the borrower to be displaced from the home for more than 30 days or renovations that will take more than 6 months to complete
- Luxury items
- swimming pools
- hot tubs
- tennis courts
- barbecue pits
So if you're looking to make some upgrades to that house instead of trying to sell it and find a bigger, newer home - you may want to consider the FHA 203k as an option. It's certainly one way to go that works well. This program has been working since the late 1970's.
Learn more about your refinance to remodel options with a free eBook. Download "The Complete Guide to Spring Home Improvement Financing" at the button below. It lays out your options, plus show you 10 home improvements you may not need to finance. Get your free copy today.
(remodeling update photo: Flickr user cjc4454)