If the cost of your renovation project exceeds the amount of “lendable equity” available to you, then refinancing with a Renovation Mortgage using either the Fannie Mae Homestyle or FHA 203(k) enables you to borrow against the value that will be created when your improvements are complete. If your lendable equity is adequate, then you may want to consider either a Home Equity Line of Credit, or Cash-out Refinance. Of course, the convenience of a Credit Card for short term financing often works for small projects.

Buyers often defer larger, more expensive projects for a few years until they replenish their savings or build equity in their home. With a Renovation Mortgage from M&T Bank, you can finance both the purchase of your new home and the cost of renovation in one loan and begin your project within a few weeks of closing. This can also allow you to build equity and re-build savings immediately.

We offer a number of different Renovation Mortgages, and our loan officers can help you determine the right one for your situation. 

• Fannie Mae Homestyle
• FHA 203(k)
• SONYMA Remodel (NY state only)

• An appraisal based on completed value is required. This helps to avoid over-improving the property (i.e., spending more than the value created). 
  
  
• Fannie Mae, FHA and SONYMA all require that lenders review contractors for qualifications and experience, specifically obtaining references, and copies of relevant licenses and insurance. They also require and provide a basic contract that sets expectations for all parties.
  
  
• Detailed estimates describing the work to be done and specifying labor and material costs are required. This provides an objective point of reference and reduces misunderstandings between all parties.
  
  
• Your mortgage approval gives your contractor confidence in getting paid on time for work completed according to plan.
  
  
• Have confidence that your renovation will start and be completed in a predetermined amount of time based on the product you choose. All projects must start within 30 days of settlement.
  
  
  • Fannie Mae Homestyle allows up to 9 months for completion.
  • FHA 203(k) allows up to 6 months for completion.
    
    
• At settlement, an escrow account is set up to hold the renovation funds. No money can be disbursed to the contractor unless work is completed according to the estimates/plans and inspected.
  
  
• A contingency reserve (generally 10%) is included in the renovation escrow as a precaution if it is discovered during renovation that an unforseen but required item or work needs to be included.
  
  
• Work begins after settlement.
  
  
• Disbursements for completed work are made in the form of a 2-party check, co-payable to borrower and contractor. If the contractor has performed, the borrower cannot arbitrarily withold payment.