Home Improvement Loan Limit Jumps to $75k: New Rules Make Mortgage Refinancing Easier

The new Affordable Housing Bond Enhancement Act is essentially a major tune-up for the financial tools states use to promote affordable housing, primarily mortgage revenue bonds (MRBs) and mortgage credit certificates (MCCs). The bill tackles everything from how states report bond usage to Congress to making it easier for homeowners to refinance and pay for big repairs. It’s a dense piece of tax code plumbing, but the bottom line is that it aims to put more flexibility and financing power into the hands of state housing agencies and, ultimately, homeowners.

The $75,000 Home Improvement Upgrade

One of the most immediate and tangible changes for homeowners is the massive bump in the limit for qualified home improvement loans (Section 5). Right now, the maximum amount you can finance through these programs is a pretty modest $15,000. This bill skyrockets that limit to $75,000. Think about that: $15,000 might cover a new roof, but $75,000 could finance a major kitchen remodel, an addition, or crucial structural repairs. For someone in a high-cost area or dealing with unexpected foundation issues, this change is huge. Plus, starting in 2027, that $75,000 limit will be adjusted annually for inflation, ensuring it keeps pace with rising construction costs.

Easier Refinancing for Primary Residences

If you used an MRB program to buy your first home, you know the rules can be tight. Section 4 of this bill makes refinancing that mortgage significantly easier. Currently, refinancing an MRB-backed loan can be complicated because it’s often treated like buying a new mortgage, triggering all the original income and purchase price limits. This bill carves out an exception: refinancing your principal residence won't be treated as a new acquisition, provided you still meet the original income limits. Crucially, it also removes some restrictions on the mortgage term and allows the market value of the home at the time of refinancing to be used for cost calculations, rather than the original purchase price. This is a big win for homeowners looking to lower their interest rates or tap into equity without tripping over outdated rules.

Less Tax Anxiety for State Agencies

The bill also shortens the leash on the federal government’s ability to “recapture” a portion of the subsidy if an MRB-backed home is sold too soon. Section 6 shortens the standard recapture period for certain calculations from nine years down to five years. Furthermore, if the loan is paid off completely within the first four years, the recapture tax essentially disappears for all subsequent years. This reduces the risk for both the homeowner and the state agency issuing the bond, making these programs less administratively scary.

Shifting the Paperwork Burden

In a shift that affects the financial industry, the bill moves a key reporting requirement (Section 11). Currently, the lender (the bank or mortgage company) has to report details about loans tied to Mortgage Credit Certificates (MCCs). This bill switches that duty. Moving forward, the entity that issued the MCC (usually a state or local housing authority) will be responsible for the reporting. For lenders, this is a minor administrative relief. For the housing authorities, it’s a new piece of compliance work. This change consolidates the reporting under the issuer, which might streamline data collection, but it also means those housing agencies need to be ready to handle the increased administrative load.

New Oversight and Flexibility for Bond Authority

Finally, the bill introduces new, detailed annual reporting requirements to Congress regarding how states use their private activity bond authority (Section 2). This means more transparency and oversight for these complex financial tools. Meanwhile, Section 3 gives state agencies more flexibility in how they use bond authority they’ve carried over from previous years, allowing them to transfer unused authority to other issuers—specifically for qualified mortgage bonds or certain exempt facility bonds—within a three-year window. This is a technical change, but it means states can better allocate unused financing capacity to where it’s needed most for housing.