loans
If your client is trying to renovate their home, they may be eligible for a renovation loan. The amount they can borrow depends on their situation and the type of renovation they are doing.
The amount your client can borrow
In general, most lenders approve borrowers for the following loan amounts:
- 95% of the purchase price plus the cosmetic renovation costs if the renovations are minor and use a licensed builder.
- 90% of the purchase price plus the renovation costs if the renovations are minor and they are not using a licensed builder.
- 80% of the purchase price plus the renovation costs if the renovations are significant and they are not using a licensed builder. This amount can jump up to 95% if they are using a licensed builder.
- 90% of the land’s value plus the construction costs if the renovations are designed for a complete knockdown and rebuild if they use a licensed builder. This amount drops down to 60% if they are not using a licensed builder.
- 80% of the property’s value if they did not intend to renovate at all. However, this loan amount depends on the condition and location of the property.
- 80% of the purchase price plus the cost of construction if they are applying for a low doc loan.
- 105% of the property’s value plus the cost of completion if they have a parent or family member acting as a guarantor.
Basics of renovation loans
The lender may not release the loan to your client’s contractor for minor jobs until the job is completed. However, for larger jobs, typically over $30,000, the lender may request drawdown payments and proof that the contractor has completed each project stage before they release payment.
If your client is applying for a renovation loan, they should apply six weeks before they require approval, especially if they don’t have a lot of equity in their property. For renovation loans with the most competitive rates, consult the team at Mortgage Street. We are a non-bank lender focused on providing brokers access to the best home loans. By cutting out the middleman, our loans are approved quicker and have better terms.