Can I use a mortgage loan for remodeling?

Question

I was approved for a home loan for $420k. I found an older home for $370K. Can I use some of the money to remodel the house? or do I have to take another personal loan?

Answer 1

If you own the home already and the bank's appraiser said that it is worth 420K, then you can borrower up to that amount. However, it sounds like you presently do not own the home. If that is the case, most lenders will only let you borrower up to the sales price of the home. I am sure if you looked long and hard you might find someone that would give you 5-10% over the sales price, but you will get burned on the intrest rate. A more common method would be to open a Home Equity Line of Credit (HELOC) to finance your remodeling project.

Answer 2

You will have to find other means of obtaining remodeling financing. Even though you are approved for $420K, no lender is going to give you that amount on the house unless it appraises for that amount. You can be approved for a million bucks and if you only buy a $100K property, that's what you're going to get in the mortgage.