3 Secret Government Programs That Pay You To Remodel

Believe it or not, the government wants you to remodel your home.  In fact, it wants you to do this so badly that that it will pay you to do so.

Little-known government programs adopted into law and lurking quietly on official websites offer assistance in the form of tax relief, zero or low interest loans, and free insurance to purchase a fixer-upper.

Well-Hidden To The Point Of Secrecy?

How secret are these programs?  Not secret enough that black helicopters are involved.  But they are hidden...MORE enough that I didn't know about the home improvement property tax exemption until I saw it on my annual property tax hike postcard.

The government isn't interested in helping you build that nice attached garage for your own pleasure.  However, it is interested in the big picture.  Encouraging homeowners to remodel homes helps to improve housing stock as a whole, acting as one way to improve our entire social fabric.

3 Common Elements

  1. You Must Apply Beforehand:  None of these programs are available retroactively for past renovations.
  2. Types of Remodels Are Limited:  Programs will not pay for luxury items like that Finnish sauna or water feature.  These are mainly about basic rehabs.  Interestingly, though, some property tax exemption programs will not cover what one might think of as basic (replacing a composite roof with another composite roof) but will cover an upgrade from composite to a higher-value material, because this represents a property value upgrade.  And the FHA Rehab Loans will even cover tearing down a house and building a completely new one!
  3. Oversight Required.  At least one inspection will be required to make sure that the project actually does exist and that it is proceeding according to plans.
  • 01 of 03

    Slash Property Taxes

    Couple redecorating their home
    andresr / Getty Images

     

    What It Is

    Home Improvement Property Tax Exemptions.

    What It Does

    These programs allow for total or partial exemptions from your local property taxes when remodeling your home.

    Eligibility Requirements

    Eligibility varies by county or town but usually any owner of one property will qualify  The property must be owner-occupied, but not always.

    Counties rarely itemize which remodels are allowed ​instead defining them in broad terms like "material, actual, and permanent property improvements that...MORE increase value."

    Downside

    Temporary relief from property tax.

    Who Offers It

    Written into state law, these programs are administered by tax assessors and counties or towns.

  • 02 of 03
    Applying Mud to Sheetrock
    George Peters / Getty Images

    What It Is

    Home Improvement Programs, or HIPs.

    What It Does

    Save thousands when counties or other local governments subsidize the interest on home remodeling loans.  Sometimes, all interest is subsidized; other times, only partially.

    Eligibility Requirements

    Various eligibility rules, but generally:  you must be rehabilitating an existing structure (it's not for buying a new one) and it's not for building another structure on your property; your gross income falls below a certain limit; the...MORE loan is not used for luxury items like pools, satellite dishes, decks, etc.

    Downside

    Not all areas offer HIPs.  If your locality does not offer this, you are out of luck.

    Who Offers It

    Begin with your local county tax assessor.  The application process may begin here, and then be directed to a private lender in the form of a home equity loan or HELOC, with the interest subsidized by the county.

  • 03 of 03
    Happy couple looking at each other while renovating house
    Maskot / Getty Images

    What It Is

    FHA 203(k) Rehab Loan program.

    What It Does

    When purchasing a home that needs remodeling, your first mortgage only covers the cost of the purchase--not the subsequent remodeling. 

    Concurrently obtaining a remodel loan means long approval times, high-interest rates, and balloon payments.  lenders don't like to approve remodel loans at this time because your intended house, in its current less-than-perfect state, cannot act as proper collateral.

    The U.S. government will insure your loan,...MORE wrapping purchase and remodel amounts into one package, and insuring it all for the lender.

    Eligibility Requirements

    Requirements are broad, ranging from minor (which HUD defines as $5,000 or more) up to a home that will be demolished, razed, and completely re-built.

    Downside

    Inevitable red tape.  However, independent consultants can help streamline the process for you.

    Who Offers It

    U.S. Department of Housing and Urban Development (HUD)