Of course you want to keep your beautiful home up-to-date to your taste and the latest living trends.
So it is not strange if you find it after a period of time for a new kitchen or bathroom. Unfortunately, renovations to your house cost a lot of money. Do you always wonder what people pay for this? In most cases this is not out of pocket, but a loan for renovation is taken out for this. Exactly how this works and whether you can finance your new kitchen or extension with it, you can read in this article.
There are different forms when it comes to borrowing money for a renovation. You can do this by making adjustments to your existing mortgage or by taking out a personal loan or home loan. Depending on your current situation and the amount of the loan amount, one of the following options may be the cheapest.
If you go looking for money to renovate, you will soon come into contact with the word ‘renovation mortgage’. The funny thing about this is that this is actually not a form of mortgage but only a name that indicates why you would want more or another mortgage: for the renovation. So it is nothing else than borrowing money to finance your renovation. Here you have two forms:
Increase mortgages for renovation
The first thing you think about when you are looking for a loan for conversion to your home is to increase your existing mortgage. Increasing your mortgage is actually using the surplus value you have on your home. If you have built this up, you can use this amount for the renovation. However, what many people forget is that the monthly costs will rise and you will not have this money as a buffer if your home is flooded.
Extra mortgage for renovation
If you have not yet built up too little surplus value, an extra mortgage for refurbishment is an option. You hereby complete a new mortgage on the existing mortgage amount. The big disadvantage of this is that the loan amount for a renovation often does not outweigh the extra costs. If you take out a new mortgage, even if this is for a low amount, you will pay notary fees and any costs for an appraisal report. In the meantime, other conditions apply than when you closed the current mortgage, which means that the monthly costs for the renovation can become disproportionate to the mortgage payments of the first mortgage.
Residential loan or personal loan for renovation
Many mortgage lenders can often advise not to take out a personal loan or a home loan. If the amount for the renovation is not too high, the personal loan is often the cheapest solution. Taking out a personal loan does not entail hardly any costs. At the moment the level of mortgage interest is lower than the loan rate, but with the extra costs for a mortgage you are in many cases still cheaper with a personal loan. The added value on your property you still get but the monthly costs of your mortgage remain the same. Is the amount higher what you need for the renovation or sustainability? Then a residential loan is a good solution. This loan is focused on homeowners by a longer term so you can borrow more money for a renovation without having a major impact on your monthly expenses.
Do you already see your new converted home in front of you? With our independent comparator we help you to put all lenders for residential loans or personal loans in a row. You can quickly see which conditions apply to you and what fits best with your situation to take over your home as quickly as possible.