Renovation lending consists of providing financing for the purchase or refinancing of an existing residential structure along with funds for renovation, rehabilitation, repairs, remodeling or energy improvements to the residence to meet the needs of the borrower or to bring the home up to minimum property standards. This is accomplished with a single closing transaction prior to the start of renovation work and involves a single set of fees and closing costs.
A renovation loan is different from construction financing in that the loan is fully disbursed at closing with renovation funds held in a renovation escrow account. The borrower pays a standard principal and interest payment (plus escrows for real estate taxes, hazard insurance and mortgage insurance, if required) beginning with the first payment.
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