Renovation Loan: The Home Hack That Creates Instant Equity

Patriot Nation, what is the one home hack that savvy investors use all over the country right now to increase their equity day one? And what is that same home hack that you as maybe a first-time or second-time home buyer can use not only to build equity day one, but also to bypass the biggest obstacle in the entire home buying process, which is lender required repairs. What is that home hack, you ask? Well, those two beautiful words, renovation loan. The renovation loan is going to be discussed here. We'll talk about why you're going to want it, some of the advantages or disadvantages. So, if that's of interest to you, hit the like and subscribe, share with your family and friends, and let's kick off this rodeo right now. Hi folks, I'm Kevin Fagan. from the mortgage patriot on your side nestled here in the Hill Country above San Antonio, Texas, showing all you proud Texans and all you great folks all around the country. Another great one. Why is that? Cuz we're killing two, not one, but two birds in one video today. We're going to talk about how to create equity that wasn't even there when you signed the contract. Believe it or not, we're going to create equity just by the use of what kind of financing we're going to take. Also, we're going to solve the problem of the biggest obstacle you possibly have in a transaction and the one that makes things blow up and not get to the finish line is lender required repairs. We're going to show you how a renovation loan solve both those scenarios, making you money and avoiding problems uh just with this one loan technique. Hit the uh subscribe if you would please. Really helps me with my YouTube content. Brings my videos to the forefront. I've got a great library of informative videos that help you out. I'm just the loan uh patriot in the wilderness fighting all the big lenders. So, uh would love to help you and let's get into that content right now. Let me first explain what a renovation loan is. And it's just a it's it's just a traditional mortgage loan that uh has two components to it. It has the purchase component and it has the renovation component. So, let's take for example, you're buying, say, a $250,000 house that needs a lot of repair and or needs a lot of fixes that you that you want to upgrade to. And let's say that amount is $50,000. So, your the renovation loan allows you to combine those two together, the 250 and the 50 into one loan. So, your loan is in effect two is $300,000. And what happens is the selling party gets paid off the $250,000 for the purchase. And that separate $50,000 goes into an escrow, an escrow account that's separate and that you can't touch, but your contractor can. And so the contractor will phase money out of that account as he as he or she does the repair work until you have a completed home. So that's the essence of a renovation loan is it's got again two components and in just one loan. and you're only paying in the in the case of an FHA, for example, three three and a half% based on 300,000. So, in other words, you're not going to have to come out of pocket for $50,000 for the renovation. It's inside the loan. So, how do you as a first-time home buyer or even a second time home buyer take advantage using a renovation loan to create instant equity in your home? So, let me give you an example. We're going to use the example of a home that was all if it's all, you know, up to market standards would be $350,000, but it's got issues. And it currently is listed in the local MLS for $275,000. And why is that? Because it it's a 30-year-old home. It's never had a new roof, so it needs a new roof. It's got wiring issues. It's got carpet all throughout. It's got other updating lighting fixtures that are like fluorescent bulbs that nobody wants anymore. You know, it's got $50,000 worth of fixes required. New roof: $20,000. New wiring/fuse box: $5,000. Water heater and HVAC: $5,000. New flooring upstairs: $10,000. Kitchen countertops and backsplash: $8,000. New lighting fixtures: $2,000. Total: $50,000 renovation budget. On the purchase of 275 plus the 50 using your renovation loan, you're only coming out of pocket for three and a half% on $325,000. You have a $35,000 FHA loan on 325,000 and you are immediately walking into a home that once renovated is going to be worth $350,000. So, you've improved it just by renovating it, and you've only spent 50 to gain 75. So, you have $25,000 of magic equity that is going to work for you later down the road. Now let's look at the second home hack aspect of the renovation loan. That is avoiding lender required repairs. If you get that under contract and if you don't use a renovation loan, somebody is going to be responsible for that $30,000 worth of work. Why? Because those are safety issues. The lender is going to require somebody to pay for those. But the renovation loan fits the need. So, not only again are you creating $25,000 worth of equity, but you've now set aside $50,000 into your escrow account to fix those very items and to also give yourself some new flooring and some new kitchen counters and some new lighting. So, it's a perfect solution to everything. Creates equity for you and avoids lender required repairs. The renovation loan does it all. I'm the mortgage patriot Kevin Fagan on your side. Make it a great one. END OF TRANSCRIPT