Renovate your home with home loan

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The different loan possibilities to renovate your home

home loan

Over the years, your house or apartment is damaged, becomes too small or does not correspond to your wishes. You then want to do some work to renovate your home. Unfortunately, the cost is often high and forces you to call on the loan. You must then find yourself in the various possible loans and in the multiple proposals of financial organizations.

Several types of loans are possible:

  1. The renovation credit
  2. Mortgage credit
  3. Reusing an existing mortgage loan
  4. Green energy credit

How to choose between different formulas, according to their advantages and disadvantages?

home loan

1-A renovation credit

The renovation credit is a loan to renovate, that is to say a loan intended solely to finance renovation or conversion work. It concerns an amount fixed at the beginning and runs over a predetermined period. The need for proof of expenses explains the lower interest rate than the personal loan that does not require it.

What are the advantages ?

  • Speed : If your financial situation is sound, you are likely to get credit as soon as possible. In addition, no warranty is required. The application can be submitted online.
  • Simplicity : you set the amount you need and the repayment period yourself. You transmit to the lending agency the usual proofs (invoice, signed purchase order, quote …).
  • Security : the rate and the amount of the monthly repayment are fixed, thus avoiding unpleasant surprises.

What are its disadvantages?

  • The borrowing rate may be higher than that of a mortgage loan.
  • The limitation of the repayment period compared to a mortgage loan.

2- A new mortgage credit to renovate

2- A new mortgage credit to renovate

Mortgage credit is the most common way to acquire real estate. It is a long-term loan that can be repaid over several decades. It requires certain conditions such as the guaranteeing of the property, the underwriting of insurance. There are mortgages to renovate.

If your property is not yet mortgaged, you can use this new mortgage path.

What are the advantages ?

  • The length of the repayment term . A long term makes it possible to borrow large amounts because the total amount to be repaid will be divided by the number of months of the loan. Added to this are the interests.
  • Mortgage interest rates are lower than other types of credit. Indeed, the bank takes less risk since the amount borrowed is guaranteed by the mortgage.
  • Tax reductions . Under certain conditions and depending on personal circumstances, a mortgage loan may give rise to tax reductions. Their modalities depend on the region where the building is.

What are its disadvantages?

  • The mortgage of the property . In order to protect against the risks of non-payment of repayment payments, the bank obtains, by the mortgage, the right to seize the property and dispose of it. The owner is thus doubly bound, by his repayment and by this right of pre-emption of the bank.
  • The possible variability of the repayment rate . Most lending institutions impose a periodic review of the borrowing rate in order to guard against adverse financial conditions for them. In this way, the borrower does not know exactly what interest he will have to pay. It is therefore a risk factor for him.
  • The cost of the mortgage file . The mortgage act takes place in front of a notary. It entails various costs that are added to the costs of reimbursement (notary fees, registration fees, mortgage fees, legal fees).
  • The need to take out insurance . In addition to the home insurance required by the bank, you will also have to take out outstanding balance insurance which guarantees repayment in the event of the death of the borrower.

3- An existing mortgage loan

This is to take advantage of the already repaid portion of a mortgage loan to re-borrow a new additional amount. This solution can intervene after a few years of reimbursement.

What are the advan ages t?

  • The various benefits of mortgage credit persist.
  • No fees related to the mortgage . Indeed, since the mortgage file is already open, there is no new mortgage or notary fees, mortgage law …).
  • Possibility of renegotiating the rate (if downward trend) of mortgage credit.

What are its disadvantages?

  • The various disadvantages related to mortgage credit .
  • When updating your modified mortgage, the bank may charge a new interest rate, depending on the current context.
  • Changes to the mortgage credit will result in processing fees .

4- A green energy credit

4- A green energy credit

If at least 50% of the planned renovations involve energy savings, you can benefit from a green energy loan. The terms and conditions differ from one region to another and the municipalities may add some advantages.

What are the advantages ?

  • An interest rate lower than that of renovation credits.
  • Some benefits related to the municipality .

What are its disadvantages?

  • Need to be familiar with the regional and communal arrangements .
  • At least 50% of the amount must finance energy saving works .

In conclusion

The choice between these different formulas depends above all on your personal situation, the context and your objectives. In terms of flexibility and speed, the renovation credit offers interesting prospects .

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