Is the 203k rehab loan interest incorporated in mortgage?

[Barry Cherry]

Hello BP family,

I'm currently interested in investing in real estate and right now I and my wife are currently in the learning phase. We are curious about how the FHA 203k rehab loan is paid. We are under the impression that the FHA 203k Rehab loan is incorporated in the mortgage payment for the loan and not a separate loan that is to be paid with a different lender or different account. I guess our question is, will the interest for the loan amount be incorporated in the mortgage payment? or is there a separate rehab payment with a different interest rate?

For Example:

is it seen as a $100,000/30y fixed (w. 4% interest) home with a $25,000 rehab will make the full loan $125,000 with 4% interest?

or 

$100,000/30y fixed (w. 4% interest) home and a $25,000 rehab loan with a different interest rate?

Thanks for helping BP,

- Cherry

[Anthoney Hanks]

Welcome to BiggerPockets! I hope the best for you going forward in 2020! You would really need to talk with a lender (@Grant Greene) but my understand is 203K is a whole loan. But I believe there are other options out there too. You might also consider a multi unit property using 203K. Have others pay your mortgage!!