From Shabby to Fabby – Financing Your Fixer Upper

From Shabby to Fabby – Financing Your Fixer Upper

Turnkey homes come at a premium and in a seller’s market, many buyers often find themselves priced out of the home they want. While you might find watching your favorite home makeover celebrities rehash floor plans and restore character exciting on TV, the reality of purchasing a home that needs improvements can be daunting – especially when you’re selling a home or managing moving timelines too. 

At the Merrimack County Savings Bank, Jenifer Williams, Vice President, Residential Mortgage (NMLS 409054), and her team of originators are seeing more and more prospective clients seeking input on using financing to turn the home they are considering purchasing into the home they truly dreamed of. She has some advice on how to afford a home in realtor.com’s 2ndhottest real estate market in the US, the Greater Concord, NH area – even if it means buying a home that doesn’t check all the boxes right away. 

Why You Should Consider a Fixer Upper Home 

Buying a home that needs work isn’t for everyone, but there are some benefits that you should consider – perhaps the biggest is that it might be the best way to get into the neighborhood you want. Your proximity to the right schools, family and friends, job opportunities or the activities you enjoy can have a significant impact on your long term happiness in a home. 

You also can pay a little extra for the convenience of move-in ready, so you might find you’re able to afford a larger home or property and that you have less competition during the buying process if you opt for a home that needs some improvements. It’s also hard to quantify the beauty and character of a home that has some history, as well as having the ability to take that canvas and put your own stamp on it with your choice of finishes and fixtures. 

Financing Your Improvements

Scale and scope are two important factors you’ll discuss with your lender when determining the type of loan you need to complete your project.  Are you able to move into the home right away before improvements are made? Will you be able to stay in the home while construction takes place? How long can you wait before the improvements are made? These are all questions you will want to consider. 

Construction Loans

For large scale home makeovers, you will likely go through a traditional Construction Loan process.  You’ll purchase your home and work with your contractors and the bank to complete all renovations within up to a 12 month period.  During the construction phase you’ll pay interest only on the amounts that have been disbursed – your first disbursement will be used to pay for the existing home, and your contractor will request additional disbursements as work is completed. While many times construction loans require two separate closings, one at purchase and one at completion, at the Merrimack we offer the ability to complete both phases with a single closing, saving time and resources for every party involved. 

Rehabilitation Loans

If it’s mostly cosmetic or smaller scale enhancementsyou hope to make right away, like a kitchen upgrade or finishing an unfinished room, you’ll likely use a Rehabilitation Loan. These loans have no fixed dollar amount and renovations can be completed within 120 days. There are just two disbursements during the renovation process, one to cover supplies and one for labor.

Home Improvement Loans and Home Equities

If you’re in the home you want, but it’s looking a little datedor not functioning quite the way you would like, consider a Home Improvement Loan or take advantage of the equity in your home with a Home Equity Loan for the amount you anticipate needing or Home Equity Line of Credit to allow you to draw off the loan for improvements as you have time to make them. A mortgage lender can compare these options side-by-side to help you decide which one works for you best. 

Choosing Your Lender

You don’t need to wait until you have found a home to talk to a lender. In fact, engaging a lender early in the process can help you gain a better understanding of what your financing options are as well as what you can afford so that you can act quickly. 

Choose a lender you feel comfortable with, and that takes the time to get to know you and your project goals. Working with a local lender has some significant advantages, including a great understanding of special loan programs and resources that might benefit their customers. 

At the Merrimack, we do a great deal of construction lending in the area, so we stay well connected with reputable realtors, builders, and contractors to help guide you through the process.  We also understand the unique challenges and advantages of building a home in a state with geographic diversity, so we don’t shy away from ideas and plans that are outside the traditional mortgage box. Our construction loan specialists shepherd clients through the construction and renovation process, even doing personal site visits to ensure the project stays on track and within budget.   

Making Your Dreams Reality

Seeing the hidden potential in house that needs a little love and working closely with a renovation team, gives you the opportunity to stay involved throughout the process, and make your dream home a reality. Don’t be intimidated – you’ll find experts and resources as close as your local bank!