The renovation may or may not happen regardless of what the borrowers intend. LTV is calculated at the time the loan is made and without lending for the renovations and controlling them, I would say no.
Adding Renovations to Acquisition Price
A customer desires to purchase improved real estate. The acquisition price represents 91.7% of the purchase price and 78.2% of the "as is" appraised value. The borrower will pay for renovations out of pocket. Adding the cost of the renovations to the acquisition price would reduce the LTC ratio to 82.2%. Is it permissible to add the cost of renovations to the acquisition price to arrive at the cost of the property?
First published on 12/22/2019