Renovation Financing: Would you invest $2,500, if in 6 month you would be handed $29,000?
That has been the average return on the additional closing costs associated with a renovation 203K loans that I have closed in the last quarter. By no means am I saying that buying a home is a can’t miss investment…but if you are in the market for a home it would be wise to find the best way to invest your down payment and closing costs. The perception of renovation lending is that the closing costs are much higher on a 203K renovation loan than a standard FHA loan.
The additional Fees you will pay on a 203K loan are as follows:
- Supplimental Origination Fee (1.5% of the Renoivation Cost)
- Draw Inspections ($150-$250 per inspection-usually 3-5 Inspections)
- Title Run Downs ($50-$100 some lenders require these for each draws others just for the final draw)
- Hud 203K Consultant fee (This will range between $0-$1,500 depending on the size of the Project)
Over the last quarter on average my 203K loans have had additional closing costs of about $2,500 and they have after improved appraised values of more then $29,000 in equity. It’s equity not cash so it’s not like you will be able to run out furnish your home with the equity…but If you work with the right realtor that helps you find that diamond in the rough…you may have the opportunity to refinance after the work is complete and eliminate PMI. No one can guarantee that will happen but I know it has happened. My average loan size is $280,000…Monthly Mortgage Insurance on that loan amount is $128 per month. For some that cash flow increase makes refinancing worth while…Not to mention you aren’t spending your weekends and free time scraping wall paper and painting rooms and dropping ridiculous amounts of money at Home Depot…on the Honey Do List!