Tilda 
The rehab loan lets you buy and repair a property, all in one transaction. This allows you to get a loan higher than what is currently worth the property, in the form of 1st and 2nd. Which is good if you find a house that is in poor condition and requires only cosmetic repairs or a small update. And a rehab loan can give you a maximum of $ 35,000, which would be the case for a major repair project. However, there is a small catch.
How it works
The problem is that all the work must be done by a licensed contractor, who eats in his equity position in the property. Most people can at least paint, clean and do minor repairs, change wall plates, etc. The contractor has a certain amount of time for repairs, usually before the property closes. If you can get a home loan in its “as is” condition. Make sure you have no penalty for early payment of the loan. Take the next six to twelve months to determine where the property will be valued at a higher price. Then refinance the house under a new rehab loan limit. Who will weigh and decide if the amount that will cost for refinancing is worth it. It should not exceed 5% to 6% of the value of the property, which should be able to integrate the new loan. There will be no extra charge. Once you have refinanced, your loan payment should decrease and you should have a higher position in this house at the same time. With the current low interest rates, it is better that you do not even realize the refinancing, everything will depend on your current situation.
Example
A value of $ 200,000 after repair. You buy the house for $ 150,000. You need about $ 30,000 in repairs by the contractor. Once the repairs are completed, you have a capital position of $ 20,000 that adds what you deposited into the original loan. But if you have half of the equipment on hand and you can use a brush and a roller, use a caulking gun and know how to clean a house, you can reduce that estimate by about $ 10,000. If repairs are minor, many people can do these repairs and save thousands of dollars. Always check with your city for proper permissions before starting any repair project.
In conclusion
If you can not do the repairs or if you do not have the money or the time to do these repairs, the rehab loan is for you. However, if you have the money to settle and the down payment for your new home and you are able to make minor repairs, you will find yourself in a better financial position in the future. And if you refinance the house, payments can be significantly lower. He could even rent the house for more than he was paying on the mortgage at that time, which would still give him a tax shelter and passive income for the future. Of course, if you decide to move in the future. Try to stay on the property for at least 24 months, this way you will not have to pay the capital gains tax, which at one point was 42%.
