Renovation Refinance Options for Washington Homeowners

Renovation Home Loan MortgageFinance home improvements as part of your mortgage — not with separate loans

If you love your location but your home needs updates, a renovation refinance may allow you to combine the cost of improvements into your mortgage — rather than relying on credit cards, personal loans, or multiple financing sources.

Renovation refinance options are designed for homeowners who want to improve, repair, or modernize their home while refinancing their existing mortgage.

This page explains how renovation refinancing works, when it makes sense, and how it compares to other home equity options for homeowners in Washington.

What Is a Renovation Refinance?

A renovation refinance allows you to refinance your current mortgage and include renovation costs in the new loan.

Instead of borrowing against your home after repairs are completed, renovation refinancing is based on the projected value of the home once improvements are finished.

This can be especially helpful when:

  • Needed repairs make a standard refinance difficult
  • Renovation costs are significant
  • You want one loan and one monthly payment

When a Renovation Refinance Makes Sense

You may want to explore renovation refinancing if:

  • Your home needs repairs to qualify for standard financing
  • You want to remodel kitchens, bathrooms, or living space
  • You’re planning accessibility upgrades or aging-in-place improvements
  • You want to modernize instead of moving
  • You want renovation costs built into long-term financing

This option is often used by homeowners who want to improve their home’s functionality or value rather than relocating.

Using a Renovation Refinance to Build or Improve an ADU or DADU

In Washington State, many homeowners are choosing to add or improve an Accessory Dwelling Unit (ADU) or Detached Accessory Dwelling Unit (DADU) to increase living space, generate rental income, or create housing for family members.

A renovation refinance may be an option for homeowners who want to finance certain ADU-related improvements as part of their mortgage — rather than using separate loans or paying cash.

How Renovation Refinancing Can Support ADU Projects

Depending on the loan program and scope of work, renovation refinancing may help with:

  • Converting existing space into an attached ADU
  • Remodeling or upgrading an existing ADU
  • Adding kitchens, bathrooms, or separate entrances
  • Improving systems (plumbing, electrical, HVAC) required for an ADU
  • Making safety or habitability upgrades needed for rental use

Rather than accessing equity after construction, renovation refinancing is based on the after-improved value of the property once the planned work is completed.

Planning Matters with ADU Financing

ADU and DADU projects require early planning. Before choosing a renovation refinance, it’s important to consider:

  • Local zoning and permitting requirements
  • Whether the ADU is attached or detached
  • Contractor and cost documentation
  • How rental income may be treated (if applicable)
  • Long-term financing strategy

Renovation refinancing works best when the project scope is clearly defined and financing is coordinated before construction begins.

Renovation Refinance vs Other Equity Options

Renovation refinancing is not the same as a cash-out refinance or HELOC.

Renovation Refinance

  • Based on after-improved value
  • Renovation funds are escrowed and disbursed as work is completed
  • One mortgage, one payment

Cash-Out Refinance

  • Based on current value
  • Funds received at closing
  • Borrower manages renovation budget independently

HELOC or Home Equity Loan

  • Second loan in addition to first mortgage
  • Often variable interest rates
  • Good for phased or smaller projects as the loan amount is restricted by loan-to-value guidelines.

Each option has pros and cons depending on your project, timeline, and financial goals.

Common Renovation Refinance Programs

Several renovation refinance programs exist, each with different guidelines and use cases.

🔹 FHA Renovation Refinance (203(k))

Backed by the Federal Housing Administration, FHA renovation refinance programs may allow homeowners to refinance and finance repairs in one loan.

These programs can be helpful when:

  • The home needs health or safety repairs
  • The property does not currently meet minimum condition standards
  • Flexibility is needed in renovation scope

Renovation types may include:

  • Structural repairs
  • Roofing, plumbing, or electrical updates
  • Kitchen or bathroom remodels
  • Accessibility improvements

🔹 Conventional Renovation Refinance Options: Fannie Mae HomeSyle and Freddie Mac ChoiceRenovation

Some conventional loan programs allow renovation costs to be included in a refinance, often with different requirements than FHA options.

These may be suitable for:

  • Borrowers with strong credit profiles
  • Homes needing cosmetic or moderate renovations
  • Projects that improve livability or efficiency

Eligibility and renovation limits vary by program and borrower profile.

What to Expect with Renovation Refinancing

Renovation refinance transactions typically involve:

  • A detailed renovation plan and cost estimates
  • Contractor documentation and approval
  • An appraisal based on the after-improved value
  • Escrowed renovation funds released in stages
  • Inspections to confirm completed work

Because of these added steps, renovation refinances generally take longer than standard refinances, and planning ahead is essential.

Important Considerations

Before choosing a renovation refinance, it’s important to understand:

  • Renovation timelines and contractor coordination
  • How funds are disbursed
  • Inspection and documentation requirements
  • Loan limits and equity requirements
  • Whether alternative options may be simpler

Renovation refinancing works best when expectations are clear and the project scope is well defined from the beginning.

Is a Renovation Refinance Right for You?

A renovation refinance may be a good fit if:

  • Your improvements are substantial
  • You want long-term financing for renovations
  • You prefer a single mortgage payment
  • Your home’s value will increase meaningfully after improvements

In other cases, a cash-out refinance or HELOC may be a better solution.

Related Resources

Thinking About Renovating Your Home?

If you’re considering refinancing to fund renovations, the best first step is reviewing all available options — not just one program.

I help Washington homeowners compare renovation refinance options with cash-out and home equity solutions so they can choose a strategy that fits their home, timeline, and long-term plans.

👉 Request a personalized rate quote
👉 Apply for a mortgage
👉 Contact me with questions