Renovation loans for the home you live in, and ground-up construction and rehab loans for real estate investors. Here is what each one covers, how draws and inspections work, and how to start.
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Fidelity Residential · NMLS #103098 · Equal Housing Lender
Which one fits depends on whether you will live in the home or are building to sell or rent.
One mortgage that pays for a home and the work it needs, or refinances the home you own and pays for the work, with a single closing. The loan is based on what the home will be worth when the work is done. Options include FHA 203(k), Fannie Mae HomeStyle and Freddie Mac CHOICERenovation.
Renovation loansA short-term loan for an investor who buys a lot and builds a new house, or builds on land they already own, to sell it or keep it as a rental. The money for the build is held back and released in draws as the work is finished and inspected. For business purposes only.
Investor construction and rehab loansShort-term financing to buy and renovate a property, then sell it or refinance it into a long-term loan. Renovation money is released in draws as the work is done. For business purposes only.
Fix and flip and bridge loansThe money for the work is held back. At closing, the purchase or payoff is made, but the money for the work is not handed over. It is held by the lender and paid out in stages, called draws, as each stage is finished.
An inspector checks each stage. Before a draw is paid, an inspector visits and confirms how much of the work is complete. On a renovation mortgage the payment goes to your contractor; on an investor loan the lender reimburses you for the completed work.
The budget is set at the start. The work is listed line by line before closing, with a reserve for surprises. Changes to the plan need the lender’s agreement first.
| Question | Renovation mortgage | Investor construction or rehab loan |
|---|---|---|
| Who it is for | People buying or refinancing a home to live in | Real estate investors; business purpose only, never your own home |
| What the loan is based on | What the home will be worth when the work is done, and your income and credit | The property’s value before and after the work and the total cost of the project, plus your credit and experience |
| Monthly payments | A regular mortgage payment | Interest only during the project |
| When the work is done | The loan stays in place as your long-term mortgage | The whole balance is due at the end of a short term; you repay it by selling or refinancing into a long-term loan |
| Who checks the work | An inspector, or a HUD consultant on an FHA 203(k) Standard loan | A third-party inspector before each draw |
Pick a contractor and list the work line by line. A new build also needs plans or a permit and, for investors, a feasibility report.
You apply and the property is appraised as it will be when finished. Investor loans also look at the value today and the total cost.
The purchase or payoff is made at closing. The money for the work is held back for the draws.
Each finished stage is inspected and paid. A renovation loan then simply continues as your mortgage; an investor sells or refinances.
Terms depend on your record of completed projects; first-time investors are considered for purchases, on tighter terms. For a renovation mortgage on your own home, see the renovation loans page.
Talk to a loan officer about your plans before you buy land or sign with a builder. The loans described on this page are renovation loans, which improve a home you buy or already own, and business-purpose loans for investors who build to sell or rent.
No. Renovation loans repair or improve an existing home; they cannot be used to tear it down and rebuild, and they do not pay out cash to you.
No. Investor construction, fix and flip and bridge loans are business-purpose loans. The property is never your home, and you sign a statement saying so.
Each budget includes a line for surprises. Any change to the plan needs the lender’s agreement first, so talk to your loan officer as soon as you see a change coming.
It depends on the project, the contractor and the inspections. Construction and renovation loans have more steps than a standard purchase, so start early and share your plans and dates with your loan officer.
Fidelity Residential is licensed in many states. The full, current list is on NMLS Consumer Access (opens in a new tab), or call us at 732-686-9999.
Get a quote, apply online, or talk it through with a licensed loan officer.
This page is general information, not a commitment to lend. Programs, terms and eligibility depend on credit, income, property and underwriting review and are subject to change without notice. Business purpose investor loans are for investment property only.