TEG’s Renovation Loan is a mortgage loan that includes funds for renovating, remodeling, and repairing a home.
What is a Renovation Loan?
TEG’s Renovation Loan is a mortgage loan that includes funds for renovating, remodeling, and repairing a home. It is one loan with one monthly payment; you do not have to take out a loan for the mortgage and another loan for home repairs.
The TEG Renovation Loan can be a purchase mortgage with additional funds for renovations or a refinance of your current mortgage with extra funds towards remodeling or repairing.
The renovation money goes into a separate escrow account that is used to pay contractors. Borrowers do not have access to the funds as they would with a home equity loan or cash-out refinance.
When should you consider a renovation loan?
If you do not have enough cash to finance renovations or repairs and do not have enough equity for a cash-out refinance, a renovation loan may work for you. You can also use a renovation loan to purchase a new home that needs work. The loan is qualified based on the as completed value and condition of the property.
Frequently Asked Questions
Can I finance an investment property?
TEG’s Renovation Loan may only be used with a property that is intended as an owner-occupied primary residence or second home.
Who are the renovation funds released to?
Funds may be released directly to the contractor, sub-contractor, or supply vendor as directed on the draw request.
Can a subcontractor or materials supplier file a mechanics lien against my home?
Yes. Even though you may pay your contractor, if your contractor does not pay the subcontractors or materials supplier, they can file a mechanics lien against your property.
Can I act as my own general contractor?
No. A qualified general contractor is required to oversee the project.
Who pays for cost overruns during the renovation phase?
Most renovation loans have a 10-15% contingency reserve. Those funds may be accessed with an approved change order and draw request. The Borrower is responsible for paying the overages that exceed the contingency allowance.
What happens if the contingency reserve is not used?
Any remaining financed contingency will be applied to your mortgage balance as a principal payment after final draw is complete.
Can I start my project before loan closing?
We recommend waiting until financing is secured before starting your project. In the event construction has started prior to application, please discuss this with your loan officer so that they can provide the appropriate direction.
Do I have to own the home prior to closing?
No. The home may be purchased simultaneously with the closing of the Renovation Loan.
What Happens if my project is not completed prior to the end of the Renovation Phase?
You may request an extension for your project to allow time to complete renovation. Failure to complete renovations within the allotted time frame without an approved lender extension would be a violation of your mortgage terms.