Can You Include New Appliances in a Mortgage?

When you’re home shopping, it’s safe to assume that the house you buy will include major appliances like a stove, oven, and refrigerator.

But what if the residence lacks these essentials or you desire new appliances? Is it possible to roll these costs into your mortgage loan?

The answer will depend on what kind of loan you choose and other factors. Take a moment to learn more about if and when you can pay for new appliances via mortgage financing, different strategies for getting those new appliances, the pros and cons of including appliances in your mortgage, and alternate ways of funding these everyday household machines.

Can the cost of new appliances be rolled into your mortgage loan?

Technically, mortgage lenders will not allow you to include the price of new appliances in a mortgage purchase loan.

“In most cases, when it comes to buying a home, lenders won’t loan additional funds beyond the cost of the home itself and any fixtures that are already included and affixed to the home,” says Bethany Stalder, co-owner and principal agent with Fidelis Property Group.

Marty Zankich, director and owner of Chamberlin Real Estate School, echoes those thoughts.

“Most lenders will not permit a specific allowance for appliances,” he says. “However, there are several ways to include this during the transaction.”

5 ways to bundle new appliances in your mortgage

If you have your heart set on getting the latest model dishwasher, fridge, range, dryer, washer, or other appliance for your next home, but lack the funds to pay for them out of pocket, there’s still hope. Consider pursuing any of the following strategies.

Buy a new construction home

You’re in luck if the home you want to buy is a new construction residence yet to be built. That’s because you can negotiate with the builder to include these costs in the finished home.

“With new construction, the cost of the appliances is lumped into your loan because those appliances are considered fixtures of the property. You are not using the loan to purchase additional personal property – those items will already be present in the house, and you’ve agreed to purchase it in that condition,” says Stalder.

Negotiate with the seller

If you are aiming to purchase an existing home, you won’t convince your mortgage lender to let you borrow extra to cover the price tag of new appliances. But, working with your agent, you can try to negotiate with the home seller and request that they have the new appliances you prefer installed as a condition of purchase or contingency spelled out in your real estate contract.

Be prepared for the seller to increase the home price to cover the cost of the new appliances, however.

“This strategy might be difficult to accomplish if the home already has appliances and they are in good working order. But if the appliances are not going to remain in the home or they are simply not functioning, the seller may be more open to installing new ones,” Stalder continues.

The downside here is that you may have little say in the brand or model of appliances they install unless they agree to your specific requests.

“But in competitive markets where sellers have more leverage than buyers, this is virtually impossible,” adds Stalder.

Get a closing credit

Or, you could haggle with the seller or lender to obtain a closing credit. These are funds that will be applied toward your closing costs, enabling you to bring less out-of-pocket money to the closing table, thereby providing you with extra cash after closing to purchase your preferred appliances. 

“This allows you to allocate extra funds for purchasing the appliances you desire,” Rose Krieger, a home loan specialist with Churchill Mortgage, explains.

Just be aware that any credits you receive must be applied to your closing costs. If the amount of your credit exceeds your closing cost total, you can’t take the extra money as cash you can pocket.

However, “the advantage here is that you can use your personal funds to acquire the appliances of your choice, not the seller’s choice,” says Krieger.

Note that if you request and are given a closing cost credit from your lender, you’ll likely incur a higher interest rate on the mortgage loan to pay for that credit.

Opt for an FHA 203k rehab loan

Got your eye on a fixer-upper? You can roll both the cost of the home and the expense of renovations needed into a single mortgage product via an FHA 203k loan.

That means you can use your home loan to pay for new appliances in addition to other home improvements and repairs. You’ll be required to make a minimum down payment of 3.5%, the home has to be your primary residence, and you must have a two-year track record of solid employment among other rules to qualify.

“However, this option is more complex than a standard loan and is usually intended for homes that need more work than merely new appliances. It requires getting quotes from contractors and obtaining an appraisal for the after-repair value of the upgrades,” says Stalder. “So if new appliances are the only thing the home needs, you may find it challenging or not possible to obtain a renovation loan for this purpose.”

Opt for a cash-out refinance

If you already own a home but want to refinance, you can pull the trigger on a cash-out refi, which allows you to tap your home’s equity (assuming you’ve earned at least 20% equity) and use those liquidated funds paid at closing toward new appliances.

As with a purchase loan, you’ll pay closing costs on a refi, costs that often equate to 2% to 5% of your borrowed amount. And it usually doesn’t make sense to refinance unless you can lower your interest rate and monthly payments or shorten your term as desired.

The plusses and minuses of including new appliances in your mortgage

The benefits of any of these five options are obvious: You won’t have to save up extra and fork over money you probably don’t have right now to pay for those brand-new appliances you’ve been wishing for.

But the disadvantages can trump the advantages.

“The major drawback of borrowing extra to pay for new appliances is that you could end up paying significantly more for those products in interest over time. And appliances, like cars, are a depreciating asset. As long as the home’s current appliances are functioning, you’ll be financially better off replacing them over time as needed, when you can afford to,” suggests Stalder. 

 Imagine you want to buy a resale home and need to borrow $320,000 at a 6.55% fixed rate over 30 years. But you request and are granted a lender credit, which must be used for closing costs (estimated at 4%, or $13,000), which raises your rate slightly to 6.80%.

In this case, you’ll pay $2,153 per month in principal and interest payments on your mortgage; but if you had not opted for the lender closing credit, you would have paid $2,033—$120 less.

Over the life of that 30-year loan, you will have also paid an extra $33,758 than if you didn’t choose the lender credit. Subtract your estimated $13,000 out-of-pocket closing costs from $33,758, and you get $20,758. Ask yourself: Could you have purchased new appliances out-of-pocket for less than that amount? The answer is almost certainly yes.

Worthy alternatives

If you can wait until you own the home and earn sufficient equity, you can instead fund the expense of new appliances via the following options, which will likely cost you much less in total interest than if you rolled the price of these machines into your mortgage loan:

• A home equity line of credit (HELOC). “This is advantageous, as it provides a revolving line of credit, allowing for multiple uses as it gets paid down. But most HELOCs come with variable rates,” says Krieger.
• A home equity loan, which usually comes with a fixed rate and, like a HELOC, will require using your home as collateral.
• A personal loan, which may charge a higher interest rate than the previous two options but which can be had for no collateral. 
• Store financing, which can be worthwhile if the rate is low and terms are flexible.

“If you choose to finance through a retailer, try to choose the shortest term you can,” advises Stalder. “For instance, if you pay $7,500 for new appliances and finance them at a 9% fixed rate over 12 months, you’ll ultimately pay an additional $370 in interest, for a total of $7,870. Over 24 months, you’d pay $723 in interest or $8,223 for those same appliances. Some appliance retailers will even offer options to finance your purchase with little or no interest in the first few months.” 

Just remember to apply for in-store or third-party financing only after you’ve closed on your home loan, as applications for new credit can derail your ability to get mortgage financing.

The bottom line

It’s almost always better to pay for new appliances after you’ve closed on your mortgage loan and moved in, at a time when you can afford to. That’s because rolling these expenses into your mortgage financing will cost you plenty over the life of the loan.

Do the math, evaluate different financing options, and decide which strategy works best for you.