Borrowing to do work at home is an option that both buyers who buy a second-hand home and want to make reforms before settling in it, as well as owners who want to revalue a flat or house before launching it on the market consider with Sky Marketing.
For this reason, many people wonder how loans work, how they differ from mortgages, or what is the capital limit that we can obtain with their grant.
First of all, all home improvement loans are fairly flexible. At the end of the day, it is not the same to condition a home (for example, only change the kitchen, expand the bathroom or replace the electrical appliances with new ones), than to do a comprehensive reform (change the bathroom, kitchen, floors, facilities, windows, doors, etc.) since, in the second case, the capital to be invested is much higher.
But, why opt for a mortgage loan and not for a personal credit? Do you have any advantages?
Advantages of loans for works at home
In reality, mortgage and consumer loans and credits are two very similar financing formulas. In fact, some banks directly offer personal loans for renovations. The granting of more or less capital will depend, in both cases, on the bank and on the financial and employment situation of the client, and on their relationship with the entity, among other factors.
However, normally the loans for works at home have better conditions because they offer lower interest rates (between 5 and 8%), and a longer repayment period.
On the other hand, when applying for a loan to carry out reforms, we must try to have a certain amount of “room for maneuver. ” The reason is that when we start to work on a second-hand home, unforeseen events may appear, and it is convenient to request more funds apart from the initial budget foreseen for the reform. As a consequence, we will have to study the options offered by the different entities in order to qualify for more capital under more advantageous conditions and adapted to our ability to repay the loan.
Home renovation loans: principal, interest, commissions and amortization
When we apply for a loan to make a reform, the most important thing is to be clear about how much money we are going to ask for. The reform concept is very broad, and that is why banks offer loans for home works ranging from € 600 to € 75,000 depending on each entity.
Generally, home construction loans are in very good condition. Unlike mortgages, loans for this purpose usually have a lower fixed rate (between 4 and 6%), and which is negotiated before contracting.
Regarding other associated expenses, most loans for works at home have an opening and cancellation commission. In fact, although their general conditions are better and are designed to be more profitable for clients, their formalization costs are usually higher. On the other hand, and depending on the amount requested, the bank can also ask the client to contract some type of link (credit cards, insurance, etc.), to grant the loan.
As we have pointed out, the time to repay the loans for works is greater than the time to repay the loans for personal consumption. And since the interest rate is fixed, the installments are constant throughout the repayment period (between 8 and 10 years as a general rule). Another advantage of this type of loan is that many times the bank offers its clients the possibility of choosing the day of the month they want to make the payment, a flexibility that can help us organize our domestic economy.
Requirements to request loans for reforms vs. Requirements to request a conventional consumer loan
The requirements to formalize a home works loan and a consumer loan are practically the same. In both cases, the bank may request proof of income and payroll, employment history, credit history and reports on our financial situation (regular payments and debts) to verify our economic profile. In addition, to contract these products we have to be of legal age and reside in territory.
The question is, how are credit and home loans different? What product interests me the most?
The main difference between a loan and a personal credit to make reforms is the amount. In the case of credits, financing is usually lower and, therefore, will be used for smaller works. And although personal loans have a faster concession, and are a good option if we need urgent money to replace a bathtub for a shower or to change the boiler, their interests are higher, so the amount to be repaid is higher, in comparison , it will also be higher.
Find your loan for home renovations and works:
Currently not all entities offer loans for works and home renovations in their product portfolios. Some of those that do, in one way or another, are:
This entity has a specific product, the Family loan, intended for home renovations. With fixed interest, a maximum amount of € 60,000 and a repayment term of up to 6 years, it is a particularly advantageous option for those who are already clients of this entity.
Cutbank also offers a specific product for home renovations. The minimum amount in this case is € 500, and the maximum is € 75,000. The maximum return period is 10 years, and there is the possibility of customizing the installment, term and payment date, making it one of the most flexible options on the market.
In the case of BBVA, the granting of loans for reforms in the best conditions is conditional on direct debit of the payroll. With this link, the interest on the loan will be 7.2%, with an opening commission of 2%. The minimum amount will be € 12,000 and the maximum € 60,000, with variable repayment terms between 5 and 10 years.
If we want to request a loan for works at home in the ING, we must bet on an Orange Loan because, despite being a conventional consumer loan, this product has some conditions or others depending on its purpose. If its use is the reform of a home, these conditions are:
- Interest of 5.95% with two mandatory links (payment protection services and life insurance).
- Minimum amount of € 6,000 and maximum of € 60,000.
- Repayment term between 2 and 7 years.
Home renovation loans are a great investment for both fitting out a home and increasing its market value. Our advice is that you check with your bank, as they will offer you the best options to finance your works depending on your situation. Then, request information from other banks to see if these conditions improve.
Are you thinking of selling your house? Do you want to carry out a reform to increase the value of your apartment? At Tajarat properties we are experts in the real estate sector. Contact us and we will give you the keys to optimize your investment and your reform.