Inconsequential alterations or minor renovations are small-scale improvements done to an existing home. These may be projects the homeowner does themselves or projects that may require an experienced contractor. These inconsequential alterations are usually cosmetic and can be internal or external. Individuals may be able to secure a renovation home loan from select lenders under the right circumstances.
Types of minor renovations
Most lenders consider inconsequential alterations to be any project that is less than $20,000. Some examples are:
- New paint inside or outside the home
- New carpet or flooring
- Fixups in the kitchen or bathroom that are quick such as vanities or fixtures
Loan basics
Your client may be able to apply for a personal loan, home equity loan or renovation loan to complete minor renovations. Personal loans are the most popular because they have fewer lender restrictions. Home equity loans are also popular for smaller amounts. Renovation loans have stricter requirements, especially if they are doing the renovation yourself. Banks dislike properties with renovations that are incomplete because they are harder to sell.
- 95% of the property value plus renovation costs if they are using a licensed builder or contractor.
- 90% of the property value plus renovation costs if they are doing it themselves
- 105% if they are using a guarantor, regardless if they are using a contractor or doing the project themselves
Banks may lend the borrower the total amount for loans less than $20,000, mainly if they apply for a personal or equity loan. If they use a contractor, the bank may not release the funds directly to the contractor until the project is complete to ensure that the loan is used for its intended purpose.
Renovation loans can be complicated, primarily when used for minor renovations. Mortgage Street and our team of lenders can help. We know the ins and outs of the renovation loan process and can find a loan that fits your client’s situation and has the best terms.