In today’s tight housing market, homeowners who are looking for a larger home or an updated home may find Rehab Mortgage Loans a better solution than selling their current home and purchasing a new home. A rehab loan lets you bundle your current mortgage with the home improvement cost rolled into one loan.

Rehab mortgage loans are an excellent way to let homeowners remodel or add additions to their home, using the future value of the home to qualify for the loan.

In simple math, 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. But if their home is presently only worth $400,000, there is not enough equity to accommodate the new price of the remodel because borrowers are limited to 80% loan-to-value cash out on mortgage loans.

So, the rehab loan will do an appraisal using the plans and specs of the remodel and give the future value from that appraisal. If that appraisal with the new addition and upgrades comes in at $500,000, then the borrower can use that new appraised value to take the money out to do the remodel today.

In this example, the loan to value is less than 80%. Indigo Mortgage has been offering rehab loans for many years and we are experts in how they work. If you are considering a large project like this, or feel the tight housing market won’t let you find a new home, give a trusted local mortgage lender a call and we will walk you through the process of a rehab mortgage loan.