Renovation Loans: Which Type Fits Your Project
Loans designed specifically for home improvement — they let you borrow against future home value, not just current equity.
- FHA 203(k)
- 7.5–9% APR
- HomeStyle
- 7–9% APR
- RenoFi
- 8–10% APR
- Project loans
- 9–18% APR
Min 580 FICO
Min 620 FICO
Borrow against after-renovation value
Unsecured, faster funding
The four main renovation loan types
- FHA 203(k) — government-backed, low down payment, allows major structural work. Two flavors: Limited (under $35k) and Standard (over $35k, requires HUD consultant).
- Fannie Mae HomeStyle — conventional, no PMI with 20% down, more flexible than 203(k).
- RenoFi loans — borrow against post-renovation value (great for low-equity homeowners).
- Unsecured "project loans" — fast, no equity needed, higher rates and shorter terms.
When a renovation loan fits
- You're buying a fixer-upper and want to roll the rehab budget into the mortgage
- You're early in your mortgage and don't have enough equity for a HELOC or home equity loan
- You want a single fixed payment instead of a separate second mortgage
When a HELOC or home equity loan is better
- You already have 20%+ equity
- Your current mortgage rate is well below today's rates
- You want to avoid contractor approval and inspection bureaucracy
Compare options
Renovation loan options compared
| Option | Typical cost | Lifespan | Best for |
|---|---|---|---|
| FHA 203(k) Limited | 7.5–9% APR + MIP | 15–30 yrs | Cosmetic to mid-scope, lower credit |
| FHA 203(k) Standard | 7.5–9% APR + MIP | 15–30 yrs | Major structural, fixer-uppers |
| HomeStyle Renovation | 7–9% APR | 15–30 yrs | Conventional buyers, more flexibility |
| RenoFi Loan | 8–10% APR | 10–20 yrs | Low equity, want HELOC-like flexibility |
| Unsecured project loan | 9–18% APR | 2–12 yrs | Fast funding, no equity, smaller scope |
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Frequently asked questions
What is an FHA 203(k) loan?
An FHA-insured renovation mortgage that lets you finance the purchase or refinance of a home plus the cost of major renovations into a single loan. Down payment as low as 3.5% with a 580 FICO.
Can I do the work myself on a renovation loan?
Generally no on FHA 203(k) — work must be done by an approved contractor. HomeStyle allows some DIY for borrowers with relevant experience, with documented labor savings rolled into the loan.
How long do renovation loans take to close?
30–60 days typical, longer than a standard mortgage because of contractor bids, scope review, and (for 203(k) Standard) a HUD consultant.
Can I refinance a renovation loan later?
Yes — once renovations are complete and the new value is documented, you can refinance into a standard mortgage to drop MIP or shorten the term.
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