Renovation is the new building. As we indicated in other articles, renovation or refurbishment is completely in. It is not always clear to growers how you best pay this. Are you taking a renovation loan or a mortgage for renovation works? In this post we come back to the main differences between the two loans.
Anyone who decides to renovate their home will often borrow money for this. You can finance the works with a renovation loan or with a mortgage for renovation work. In this case they both relate to the house but are nevertheless different in nature. Below we make a small comparison of both loan forms. You can find a lot of detailed information on our website, both about the mortgage loan for purchase and about the mortgage for renovation work.
Mortgage for renovation works: characteristics
With a mortgage for renovation works, the home is taken as a guarantee. This means that the risks for the lender are limited. The interest rate is therefore very advantageous.
However, there is also a disadvantage attached to it. The loan must be registered with a mortgage, which entails a lot of extra costs. The file must pass through the notary, which does not allow for quick processing and payment.
Renovation loan: characteristics
- A renovation loan is a form of installment loan. This means that you get a fast approval in your file, just like with a car loan or personal loan.
- You can simply submit your application online. When the loan is approved, you quickly have the money. Moreover, there are no extra costs. The handling goes fast and without much back and forth.
- In contrast to the mortgage for renovation work, the house is not taken as collateral. This means that the interest rate of a renovation or refurbishment loan will also be higher.
What to choose?
To choose the best and cheapest loan you have to weigh the two loan forms against each other. The mortgage loan for renovation work has a lower interest rate but leads to a lot of extra file and notary costs. A normal rebuilding loan (as an installment loan) has a higher interest rate, but everything is included in the JPK (annual percentage of costs). So in this second case there are no extras that you have to take into account.
If you do not come up with your calculations yourself, you should ask expert advice from a specialized lender or broker. After all, the right loan starts with the right advice.