Freddie Mac has just announced a new mortgage offering aimed at those looking to finance fixer-uppers. The offering is also available to existing homeowners who want to improve their current homes.
The CHOICERenovation loan product was announced this Wednesday, with Freddie Mac saying it’s available immediately to all approved lenders. It said lenders will have two options for delivering the loan – they can wait until all renovations have been completed, or else some approved firms can offer it while the work is ongoing, as long as they provide oversight for the projects.
“We recognized there's a significant amount of aging housing stock, both in underserved areas and in the broader housing market, and there’s also a need for affordable housing,” Kelly Marrocco, director of credit policy at Freddie Mac, said in an interview with HousingWire. “This is a new offering that allows people to purchase a home that needs repair, or allows existing homeowners to renovate without having to do a cash-out refi.”
The product also comes with a feature meant to safeguard against natural disasters and flooding. Homeowners can use the funds to repair properties damaged in such cases, or else use them to make changes that would prevent such damages. For example, the funds could be used to build storm barriers or for foundation retrofitting, Freddie Mac said.
The funds may also be used to “address housing resiliency items that will either repair damage or improve the homes ability to withstand environmental hazards,” Marrocco told HousingWire.
Freddie Mac noted that the market for renovations in the U.S. has grown 50% since 2009, when the Great Recession officially ended. It also points out that 80% of the 137 million homes in the U.S. are at least 20 years old, while 40% are more than 50 years old. As such, there should be even greater demand for loan products such as CHOICERenovation in the coming years, it said.
“Given the increasing age of existing housing stock, the growing number of millennials and other first-time homebuyers looking for more affordable homebuying options, and the increase in retirees opting to age in place, the Freddie Mac CHOICERenovation mortgage is a flexible solution to finance or refinance these fixer-uppers,” Danny Gardner, a Freddie Mac senior vice president, said in the announcement.