In today’s real estate market, there’s limited inventory for people to “trade up” in the size or location of their home. High interest rates also discourage many homeowners from selling, as they would need to purchase a new home at a higher rate.

As a result, some homeowners are choosing to stay in their current homes, taking advantage of rehab mortgage loans. These loans allow homeowners to benefit from rising home values by undertaking large remodels and additions instead of selling and moving. They can stay put and still have the home of their dreams.

Benefits of Rehab Loans

Rehab loans are an excellent way to let homeowners remodel or add an addition to their home and use the future value of the home to qualify. For example, if a homeowner has a $200,000 mortgage and wants to do a $200,000 remodel and addition, they will need a new loan of $400,000. However, if their home is presently only worth $400,000, there is not enough equity to accommodate the new price of the remodel due to borrowers being limited to 80% loan-to-value cash out on mortgage loans.

How Rehab Loans Work

With a rehab loan, an appraisal is done using the plans and specifications of the remodel to give the future value of the home. This future value is then used to qualify for the loan. For instance, if the appraisal with the new addition and upgrades comes in at $500,000, the borrower can use that appraised value to take out the money needed for the remodel today. In this case, the loan-to-value is less than 80%.

Why Choose Indigo Mortgage for Rehab Loans

Indigo Mortgage has been offering rehab loans for many years, and we are experts in the process. If you are considering a large project like this, give us a call, and we will walk you through the process of a rehab mortgage loan. We will help you understand the differences versus a home equity loan or a home equity line of credit.