Each, even the smallest renovation of a house or apartment, is a necessity to incur considerable expenses related to this, and the purchase of necessary materials or employment of qualified professionals can cost even several or several thousand dollars.
Unfortunately, we usually don’t have that much money and we need to look for effective ways to get it, and one of the best is a renovation loan . However, before we go to the bank where we have an account, we should know that the majority do not offer special products for repairs and in this situation we can use a typical cash or mortgage loan.
Renovation loan – pros and cons
A loan or cash loan will be perfect for small investments, and its biggest advantage is its ease of obtaining. Of course, you will have to meet all the conditions set by the bank or other financial institution, such as having a positive credit history as well as a certificate of employment and income.
Passing the verification process means you agree to receive the loan , and the decision is usually expected only a few hours, but not more than a few days. The amount that we can borrow to restore our household’s splendor does not exceed a maximum of several dozen thousand dollars, and the longest loan period is usually 10 years.
Unfortunately, this solution has its disadvantages, which are worth getting acquainted with before signing the contract. This is primarily a high interest rate on the loan , which sometimes reaches up to a dozen or so percent per annum, and another dissuasive factor is the high commission charged for granting it. On the plus side, there are more and more banks in the era of ever-increasing competition that offer their clients a number of attractive promotions by granting loans on preferential terms.
Home renovation with a mortgage
There are sometimes situations that the technical condition of the house requires the completion of many complex works, and its major renovation . The cost will certainly be very high and will not be covered by several thousand from a cash loan . It is best to finance this renovation with a mortgage, but it can be much more difficult to obtain, and not everyone will be able to meet the bank’s requirements.
You must be the owner of the property you are renovating and cannot be mortgaged, which automatically prevents you from taking out a loan. Its biggest advantage, making it an increasingly popular method of obtaining funds for renovation , is a low interest rate, reaching only a few percent, and the repayment can be spread over 20-30 years.
Incur certain additional costs and real estate valuation
It is also necessary to incur certain additional costs, real estate valuation, which is the collateral required by the bank, you also have to pay for court fees for entry and deletion of the mortgage and tax on civil law transactions. It is also worth remembering that when completing the renovation, it will be necessary to document all work carried out before the bank and account for it thoroughly. This is most often done on the basis of collected invoices for materials or services of construction companies, but often the bank orders an additional inspection.
The decision on which form of financing we decide on depends only on our requirements and preferences, but before we make it, it is good to accurately estimate all the costs necessary to carry out the work. This will avoid an unpleasant, but often encountered situation, when in the middle of renovation it turns out that we have borrowed too little money and we will not be able to finish it.