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Most mortgage financing plans provide only permanent financing. That is, the lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property provide adequate loan security. When rehabilitation or remodeling is involved, a lender typically requires the improvements to be finished before a long-term mortgage is made.When you want to remodel or update your house, you usually must obtain additional financing for the project and a permanent mortgage when the work is completed to pay off the interim loans. Often, the home improvement financing involves relatively high interest rates and short amortization periods. Our home improvement loan program was designed to address this situation. You can get one mortgage loan at a long-term fixed (or adjustable) rate to finance both the refinance of your current property and the remodeling of the property. To provide funds for the remodeling, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work.
What properties are eligible for the Standard Home Improvement Loan?
To be eligible, the property must be a one- to four-family dwelling that has been completed for at least one year. The number of units on the site must be acceptable according to the provisions of local zoning requirements. All newly constructed units must be attached to the existing dwelling. Cooperative units are not eligible.
Homes that have been demolished or will be razed as part of the rehabilitation work are eligible, provided the existing foundation system remains in place.
In addition to typical home-rehabilitation projects, this program can be used to convert a one-family dwelling to a two-, three-, or four-family dwelling. An existing multi-unit dwelling could be decreased to a one- to four-family unit.
An existing house (or modular unit) on another site can be moved onto the mortgaged property; however, release of loan proceeds for the existing structure on the non-mortgaged property is not allowed until the new foundation has been properly inspected and the dwelling has been properly placed and secured to the new foundation.
A home improvement loan may be originated on a "mixed use" residential property, provided:
1. The property has no greater than 25% (for a one-story building); 33% (for a three-story building); and 49% (for a two-story building) of its floor area used for commercial (storefront) purposes;
2. The commercial use will not affect the health and safety of the occupants of the residential property; and
3. The rehabilitation funds will only be used for the residential functions of the dwelling and areas used to access the residential part of the property.
Are condominium units eligible?
The program was not intended to be a project mortgage insurance program, as large scale development has considerably more risk than individual single-family mortgage insurance. Therefore, condominium rehabilitation is subject to the following conditions:
• Owner/occupant and qualified non-profit borrowers only (no investors);
• Rehabilitation is limited only to the interior of the unit.
• Only the lesser of five units per condominium association, or 25% of the total number of units, can be undergoing rehabilitation at any one time;
• The maximum mortgage amount cannot exceed 100% of after-improved value.
After rehabilitation is complete, the individual buildings within the condominium must not contain more than four units. The program can only be used to rehabilitate units in one-to-four-unit structures. However, this does not mean that the condominium project can only have four units or that all individual structures must be detached.
• Example: A project might consist of six buildings each containing four units, for a total of 24 units in the project and, thus, be eligible. Likewise, a project could contain a row of more than four attached townhouses and be eligible because each townhouse is considered as one structure, provided each unit is separated by a 1.5-hour firewall (from foundation up to the roof).
How can the Home Improvement Loan program be used?
This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways:
• To purchase a dwelling and the land on which the dwelling is located and rehabilitate it
• To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it
• To refinance existing liens secured against the subject property and rehabilitate such a dwelling
To purchase a dwelling and the land on which the dwelling is located and rehabilitate it, and to refinance existing indebtedness and rehabilitate such a dwelling, the mortgage must be a first lien on the property and the loan proceeds (other than rehabilitation funds) must be available before the rehabilitation begins.
To purchase a dwelling on another site, move it onto a new foundation and rehabilitate it, the mortgage must be a first lien on the property; however, loan proceeds for the moving of the house cannot be made available until the unit is attached to the new foundation.
What are the Home Improvement Loan's eligible improvements?
The homeowner can use the program to finance such items as painting, room additions, decks and other items even if the home does not need any other improvements. All health, safety and energy conservation items must be addressed prior to completing general home improvements. Note that luxury improvements are not eligible.