home loan

10 tips to help you save and choose the right home mortgage

Good weather is favorable for the beginning of the improvement works at the house. Restructuring is expensive and liquidity isn’t always readily available.

How do you avoid being overpaid? How To Apply For A Home Improvement Loan?

These are the ten best tips to help you choose between a loan and a mortgage

1. How much to ask.

First, you need to decide how much to ask banks or credit companies. It may be worth considering a personal loan if the loan amount is less than 70 thousand euros. Restructuring mortgages are the best option for people who need larger amounts. There are no minimum values, and each institution has its policies. Credit is usually granted beginning at 30 000 euros.

2. What rate should be considered?

The rate is essential to compare and evaluate the two types. We must not limit ourselves to Tan (Nominal Annual Ratio). Instead, we should consider the Teg (Global Effective Annual Rate ), which includes all costs associated with the loan such as an appraisal or preliminary investigation costs.

3. Attention to ancillary expenses

What is the difference between loans and restructuring loans in terms of costs? The costs of preliminary investigation and collection, management, and notification of the files, and stamp duty are all considered for personal loans.

The expenses for restructuring mortgages are higher because the costs do not stop there. Apart from the above, the expert should be considered. On average, his intervention costs between 200-300 euros. Variable depending on the number of appraisals required. The deed, which the notary will have to prepare to close the loan, is also worth considering. You must also consider the costs of the fire and explosion insurance.

This is mandatory to obtain a mortgage restructuring. Pay attention, because if your house is already covered by this type of insurance, you will need to confirm that the property meets the requirements for the loan. If not, a new policy must be created.

4. The guarantees are different.

Both loans require that the applicant have a stable income sufficient to cover the repayments. For the personal loan, this is the only requirement. However, for loan restructuring, a real guarantee, which is represented by the registration on the mortgage on the property, will also be required.

This is valid for both loans and mortgages. However, if the lender feels it necessary, they may ask for additional guarantees.

5. The dispensing time can vary greatly.

Personal loans have a strong point: they are quick to disburse. Generally take between 24 and 15 days. If time is your enemy, this is the fastest route. Restructuring loans, however, follow the same process as traditional home purchases loans. It takes on average 60 days from the initial investigation to the disbursement.


6. A Sal mortgage could be helpful?

The disbursement method is another difference between a mortgage and restructuring loans. With the loan, the amount is always granted in one solution while with the mortgage, there are two.

The bank may grant the sum in one solution for some cases, such as a personal loan or a loan to cover the cost of renovations. However, if the requested amount is lower than the property’s overall value, the credit institution might offer a Sal mortgage (Work Progress Status). This financing method allows for the ‘disbursement in multiple tranches. Each one is issued by the bank after an expert has determined the property’s new value.


7. How to choose the length.

Personal loans have a maximum term of 10 years. This is why they are preferred for small loans. Mortgage restructuring can last for up to 30 years. The loan’s duration should be determined based on the amount you are asking for, the monthly payments that can be afforded, and lastly, the applicant’s age.

It is important to remember that the longer the loan, however, the interest rate will be higher, but that the monthly payments will be lighter because they are spread over a longer time. If you need to repay your debt within 10 years, the mortgage is the best option. A personal loan may be a better option if the repayment period is short. The ancillary fees are usually lower.


8. What can I deduct?

The first home renovation loan wins tax breaks. If the loan is required for the principal residence, it gives you the right to an annual personal income deduction of 19% of the interest on the mortgage.

(Maximum amount to be calculated: 2,582.25 Euros). However, the personal loan does not allow for any deductions. The owner can still enjoy the tax deductions associated with renovations, regardless of whether he takes out a personal loan, mortgage, or draws from his savings.

If the works are within the requirements of the law, the owner may request an Income Tax Deduction equal to 50% of the Intervention, a maximum of 96 000 euros. This will be applied in the ten years following the restructuring.


9. What should you do if your house has a mortgage?

What happens if the mortgage loan for the house is already in place? The bank may offer two options. If the owner is unable to secure a new loan and has no other guarantees, they could suggest a loan replacement with liquidity.

This allows the owner to replace the original loan with a new one with additional liquidity. Pay attention to the amount requested. A new loan will not be granted if it exceeds 80% of the property’s value. The personal loan is the second option. This does not require any real guarantees. However, credit companies will check that the applicant can afford the monthly payments of the loans.


10. Penalties and early termination.

Both loans allow the debtor to choose to pay the debt in full or in part before it reaches its natural maturity. The bank can no longer charge a penalty for early repayment of the first home improvement loan; in the case of a personal loan, however, it is possible to pay an indemnity of between 0.5% and 1.5% of the loan amount in favor of the company that issued it.

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