In short
A renovation loan finances the cost of repairs or improvements as part of your mortgage, either at purchase or through a refinance, underwritten on the home's projected after-renovation value. The funds are released to your contractor in draws as the work is completed.
Reviewed by Christian Penner, NMLS #368289 · Last updated July 24, 2026
What is a renovation loan and how does it work?
A renovation loan lets you finance the cost of repairs or improvements as part of your mortgage, either when you buy a home or when you refinance one you already own. Instead of qualifying on the home's current condition, the loan is based on the projected after-renovation value. The renovation funds are held and released to your contractor as the work is completed. This lets you turn a fixer-upper into your ideal home without juggling a separate construction or personal loan on top of your mortgage.
Key takeaways
The house has great bones but needs work, and paying for the purchase and the renovation separately feels impossible. Our team helps buyers and homeowners across the communities we serve fold renovation costs directly into a single mortgage, based on what the home will be worth after the work is done. Where other lenders stop, we keep working to make the project pencil out.
One Loan for the Home and the Work
Falling in love with a house that needs updating shouldn't mean juggling two loans and draining your savings. A renovation loan combines the purchase price (or your existing mortgage balance) and the cost of improvements into a single mortgage, underwritten on what the property will be worth once the work is finished. Our team specializes in loans that are tough to structure, and renovation financing is a favorite because it turns "almost right" homes into the right one.
Purchase or Refinance
Renovation financing works two ways:
- Purchase — Buy a home and fund the improvements in the same loan, ideal for fixer-uppers and dated listings
- Refinance — Tap your existing equity and roll renovation costs into a new mortgage without a separate second loan
Underwritten on After-Renovation Value
The key difference from a standard mortgage is that the loan is based on the home's projected value after the renovations are complete, not its as-is condition. An appraisal reviews your scope of work and estimates that future value, which is what makes financing bigger projects possible.
How the Money Reaches Your Contractor
Renovation funds are typically held in escrow and released in draws as the work is completed and inspected, similar to a construction loan. This protects you and keeps the project on track. We help you line up a qualified contractor and a clear scope so the file moves smoothly.
What You Can Finance
Depending on the program, eligible work can range from cosmetic updates to major structural repairs, kitchens and baths, roofing, systems, and energy improvements. Some programs are built for lighter projects and others for full rehabs. We shop a broad network of lenders to match your scope with the right program.
Let's Make the Project Work
Bring us the house and the wish list, and our team will help you structure a renovation loan that funds both in one clean package. Let's find the best path forward.
All program details and figures on this page are illustrative examples for general education only and are not an offer to lend. Program availability, pricing, and guidelines vary and are subject to change. Contact our team for current details specific to your situation.
Quick facts
- Loan type
- Renovation mortgage (purchase or refinance)
- How you qualify
- Based on after-renovation value
- Fund disbursement
- Held in escrow, released in draws
- Eligible work
- Cosmetic to structural, varies by program
- Contractor
- Licensed, approved contractor typically required
- Loan amount
- Depends on scope and projected value — ask for current figures
Is this loan right for you?
Who it's for
- Buyers purchasing a fixer-upper or dated home
- Homeowners wanting to renovate using their existing equity
- Buyers who don't want a separate, higher-cost second loan for the work
- Anyone turning an 'almost right' home into their ideal one
- Owners planning kitchen, bath, roofing, or systems upgrades
Who it may not fit
- Buyers purchasing a move-in-ready home needing no work
- Projects without a licensed contractor or documented scope of work
Pros and cons
Pros
- Combines purchase or refinance and renovation into one mortgage
- Qualifies on the home's after-renovation value, not just as-is condition
- Avoids juggling a separate second loan alongside your mortgage
- Funds are protected in escrow and released as work is verified
- Programs available for both light updates and full rehabs
Trade-offs to weigh
- Requires a licensed contractor and a documented scope of work
- Draws and inspections add steps a standard purchase doesn't have
Frequently asked questions
Can I use a renovation loan to buy a fixer-upper?
Yes. You can combine the purchase price and the cost of improvements into one mortgage, underwritten on the home's projected value after the work. It's one of the most popular ways to buy a dated home and make it your own.
Can I renovate a home I already own?
Absolutely. A renovation refinance rolls your improvement costs into a new mortgage using your equity, so you avoid a separate second loan. We'll compare it to your other options.
How are the renovation funds paid out?
They're typically held in escrow and released to your contractor in draws as the work is completed and inspected, which protects you and keeps the project moving.
What kinds of projects qualify?
It ranges from cosmetic updates to major structural work, depending on the program. Some are built for lighter projects and others for full rehabs. We'll match your scope with the right program.
Do I need a licensed contractor?
Most programs require a licensed, approved contractor and a documented scope of work. We'll help you line that up so underwriting has what it needs.
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Last updated July 24, 2026 · Reviewed by Christian Penner, NMLS #368289. This page is educational and not a commitment to lend; program details change — ask for current figures.