The HomeStyle Renovation program is an excellent option for financing your home purchase and remodeling project. It allows you to secure a mortgage for not only the purchase of a home, but also a wide variety of projects while paying for virtually every conceivable expense.
The loans are intended to be as flexible and customizable as possible, allowing numerous homeowners to utilize the program. This means it’s not only available for an original purchase, but also for people who need to refinance their homes and make upgrades.
Once again, you get the convenience, affordability, and customization of the HomeStyle program, but with a slightly different purpose.
Refinancing with HomeStyle Renovation Loans
How Does Refinancing with HomeStyle Work?
This is the program you need if you have three specific issues: 1) a mortgage with unreasonable or expensive terms, 2) the need to make improvements to the home, and 3) insufficient cash to pay for the renovations. When you refinance with the HomeStyle program, Fannie Mae allows you to finance improvements for up to 75% of the property’s as-completed value, which is basically the appraised value of the property after the renovation.
Using the value after the renovation is beneficial to borrowers, as it improves the loan-to-value ratio. By reducing the LTV, you may be able to experience better terms and lower interest rates on a loan.
With HomeStyle refinancing loan, you’ll essentially be given a sum of cash that is used for two purposes. First, a portion of the money will be used to pay off and eliminate the loan that currently exists on your home. There are many reasons to do this, which we will explain below. Next, you will have a portion that can be used to pay for the construction project. While there are two components, everything will be wrapped up in one monthly mortgage payment.
Refinancing in this fashion can be more effective for many reasons, including the fact that you can complete a wide range of projects ranging from simple to elaborate. You can make necessary changes, such as the repair of a roof, or you can enhance the home with bathroom and kitchen remodeling. You can improve the energy efficiency of the property, or add a new wing to the home, and it can all be done with one simple loan while refinancing an existing mortgage.
The program also allows for upfront draws. Basically, this allows you to pay contractors and construction professionals, which may allow the project to begin sooner and helps you avoid out-of-pocket expenses.
Traditional Refinance or Cash-Out Refinance Available
As we mentioned earlier, the HomeStyle program remains extremely flexible for users of all varieties. That flexibility is highlighted by the fact that the program can be used for both traditional refinancing, as well as cash-out refinancing.
With traditional refinancing, you basically convert the money you owe on one loan into another. The new loan is used to payoff the first, and you then make payments on the existing mortgage.
Cash-out refinancing is slightly different. If you own a significant amount of equity in the home, you can basically get a loan against your home and get cash that can be used for many different purposes. With a HomeStyle loan, you can actually get cash-out refinancing, which can be used for various reasons, as well as money to use for renovations. Once again it’s all wrapped in one package.
How to Know if Refinancing is Right for You
Refinancing through the HomeStyle program can be very beneficial, but refinancing in general may not be for all homeowners, and refinancing with HomeStyle specifically may not always be the best choice.
Should You Refinance at All?
People refinance their loans for varying reasons, but one of the most common motivations is interest rates. If you have significantly higher interest rates than the current percentages, you could save hundreds or even thousands of dollars over the course of your loan.
Another common motivation is to extend the mortgage terms and reduce monthly payments. If you have a 15-year mortgage that is restricting your monthly cashflow, refinancing to a 30-year loan could alleviate the burden of these high payments.
People refinance their loans to go from an adjustable-rate mortgage to a fixed-rate mortgage. If interest rates are currently low, and you expect they will increase in the near future, you may want to refinance to a fixed-rate mortgage, which will essentially lock in the lower payments.
Of course, if you are using a cash-out refinance, you might use the funds to cover major expenses, such as medical bills or college tuition. Because the loan is secured by your home, you may be able to obtain better terms than an unsecured loan.
In all cases, you should have a significant amount of time left on your mortgage. While the numbers will vary, it’s usually best to have at least five years left on the mortgage to realize the benefits of refinancing. If you are within five years of paying off the loan, you may not experience the benefits of better interest rates, for example.
Should You Refinance with HomeStyle?
If you think all or some of the above points apply to you, then you may be the ideal candidate for refinancing your mortgage loan. So should you use the HomeStyle program? If you believe that refinancing is right, either because of poor terms or high interest rates, and you need to make important changes to the home, then HomeStyle should certainly be considered.
If, in addition to a less-than-ideal mortgage, you also need a new roof, updated windows, or simply want to enhance your kitchen, HomeStyle could deliver the affordable, flexible, and convenient terms you need.
Learn More About Refinancing With HomeStyle Renovation Loans
HomeStyle Renovation loans may be perfect for your household, but you’ll never know unless you speak with an experienced professional. Contact our team and you’ll get trustworthy, honest advice from a staff that fully understands the details of this important renovation program.
I highly recommend Chad Baker. He does a phenomenal job and won’t trauma you or your clients. He has a whole team that works on the loans. And all the team members are great. He has a person that can translate for your clients that are Chinese. He is as good of a loan officer as you are an agent, and that is what you want when referring clients to a lender.
I was referred to Chad by my Realtor for a purchase of a new house. The experience with Chad and the team (I mainly worked with Juliann) was nothing short of outstanding. From start to finish there were always quick to respond and when needed, notify me of any new documentation that was required. There were very helpful explaining to me the pros and cons of different financing options as well as some other loan related issues, such as termite clearance outside the purchase contact and septic tank certification process. Overall, very knowledgeable and processional team. Loan preapproval was done in a single day and loan documents were ready for signing in 21 days, which was 9 days ahead of schedule. That never happened to me before.
My wife and I purchased a home in Escondido, first home together. Chad and his team made the whole process extremely easy and helped us close quickly. Will recommend to all friends and family!”