A HomeStyle Renovation mortgage is a government-backed loan that allows qualified borrowers to add extra money for remodeling or improvements to an initial home purchase mortgage or a mortgage refinancing.

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One of the most appealing aspects of these loans is that the renovations they enable could help create equity in the property almost immediately. For example, HomeStyle Renovation mortgages can help pay for design upgrades and energy efficiency improvements—covering architect, contractor and inspector costs, permits and more.

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The loans are available as 15- or 30-year fixed-rate mortgages, or as adjustable rate mortgages. The program’s benefits include flexibility and low cost—down payments can be as small as 5 percent, and borrowers avoid fees and closing costs associated with taking out a second mortgage. HomeStyle loans also offer generally lower interest rates (5 to 7 percent) than might be found with an equity loan or line of credit.