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Renovation financing startup RenoFi now offers a fixed-rate home renovation loan, which allows homeowners to borrow as much as 90% of their home’s after-renovation value — a move to target homeowners who don’t qualify for a home equity line of credit (HELOCs).

With a fixed rate for as many as 20 years, RenoFi’s fixed-rate home equity loan provides 100% of the funds, as much as $500,000, directly to the homeowner at the time of closing, according to a news release from the startup.

The new product is an addition to RenoFi’s variable rate HELOCs, which allow homeowners to borrow against their equity. RenoFi’s variable rate HELOC option, which was introduced in 2020, offers loans ranging from $25,000 to $500,000.

“The types of homeowners who will find RenoFi’s new home loans helpful are those who recently bought a home and have not yet built a meaningful amount of equity to tap,” RenoFi founder Justin Goldman told HousingWire.

Legacy renovation loans, which tend to have longer inspection periods and strict oversight of renovations, are not paid to borrowers in a lump sum, which can add a degree of difficulty when homeowners are ready to use the funds, according to Goldman.

For government loans, such as a Fannie Mae Homestyle Renovation loan, first-time buyers can qualify with a down payment as low as 3%, but renovation costs are limited to 75% of the home’s after-repair value, and borrowers must pay higher fees and closing costs than they would on other types of mortgage loans.

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A Federal Housing Administration (FHA) loan may also appeal to borrowers with a small down payment, as low as 3.5%, but a mortgage insurance premium (MIP) is required and it involves more paperwork than other types of mortgage loans.

For RenoFi’s fixed-rate home renovation loan, Goldman said: “At closing, the money is made available to the homeowner and the homeowner pays the contractor as they see fit, just like most people do today (when) using their own cash or their own home equity loan.”

RenoFi’s “renovation underwrite” technology allows lenders to provide loans based on a home’s post-renovation value, which helps lenders increase their customers’ borrowing power by 11 times on average, according to a company news release.

In April, RenoFi raised $14 million in Series A funding, led by Canaan, with Nyca Partners and CMFG Ventures also contributing. RenoFi fielded more than $2 billion in renovation financing requests in the first three months of 2022 alone, company representatives said.