The passing time is reflected in the condition of the house or apartment and sometimes there is a moment when you need to decide on renovation. It is good to think about such an investment and think about whether a home renovation loan is the right solution. What is worth knowing about renovation loans?
A loan for the renovation of an apartment and a house is one of the most popular financial aid that most Poles apply for in banks. No wonder, since approximately 700,000 renovations are carried out annually in the country on the Vistula River 1. They mainly rely on the replacement of some or all installations to restore real estate to their original technical value. However, taking into account smaller home renovations, such as painting or tile replacement, the number of such cosmetic repairs can be counted in millions.
House and flat repairs are not done only because of the natural flow of time. Often, household members decide on changes, guided by new trends or a different view of residential aesthetics. For example, arranging a restaurant in the direction of Scandinavian or rustic style is not a cheap realization and can consume a lot of cash. Some solution? A cash loan, a loan to renovate an apartment or a mortgage loan are one of the ways you will, at least partly, realize your plans and dreams about your own cozy four corners.
What loan for apartment renovation should you choose?
A person seeking additional funds for renovation usually decides on the two most popular options. These are: cash or mortgage loans. What are the characteristics of both financial solutions?
Cash loan for renovation
This type of financial assistance is provided without a specific purpose. Therefore, the borrower does not have to explain to the bank exactly how he used the funds received. Most often, a renovation loan is simply a cash loan that allows you to refresh your home spaces. Its advantage is the speed of receiving funds and less restrictive checking of the customer’s credit history than in the case of a renovation mortgage.
However, in addition to the advantages, cash loans also have disadvantages. The main ones include: a higher interest rate and a small amount that can be applied for. Hence, the cash loan for renovation allows you to do not very extensive renovations of your house or apartment. In turn, when you are thinking about major refurbishment, a better option is a mortgage loan. Thanks to it you will receive financing at a very satisfactory level. To find a loan tailored to your needs, use our cash loan ranking.
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Mortgage loan for renovation
When you are getting ready for a major renovation, it is worth reaching for substantial mortgage funds. Its low interest rate, high available amounts (up to $ 100,000) and long repayment period (30-year options exist) allow for comprehensive renovation of real estate. Unfortunately, such high quality of services is associated with many restrictions and conditions that must be met.
First of all, it takes up to a month to transfer funds from a mortgage loan (often in several tranches). The next issue is detailed verification of the borrower, who must fit into the bank’s trusted client profile. And most importantly – taking a mortgage for renovation, you risk your own real estate. Problems with the repayment of such a loan may result in the loss of a house or flat. Therefore, only people who are convinced that they can cope with the repayment of all credit claims broken down into installments can decide on this type of liability.
How to get a loan to refurbish an apartment?
Before applying for a renovation loan, you should first examine the conditions proposed by each bank. In addition to the loan amount, interest and repayment length are important. Before making a decision, it will be helpful to familiarize yourself with our credit comparison service. After submitting the application (stationary, by phone or via the Internet), the bank begins the examination of the candidate’s creditworthiness. For this purpose, it checks the debtors’ databases, of which the Credit Information Bureau is the most important. Bad credit history, which is shown by BIK, significantly reduces the chance of getting a loan.
The bank also checks the amount of income and sets the amount that the borrower can receive. Unstable income or from unproven sources usually do not give credit. Regular income confirmed by an employment contract is the most clear situation for a banking institution.
The formalities are different when it comes to applying for a cash loan, and applying for a mortgage loan is different. In the first case, you only need to provide proof of your income, and your mortgage requires you to submit many documents. These include, but are not limited to: property deed, property valuation, renovation cost estimate. It is worth remembering that a professional property valuation carried out by a bank costs around $ 500. The value of the mortgage for renovation may not exceed 60-80% of the value of the property. Each bank applies separate rules in this respect, which you should read before signing the contract.
Repair cost estimate and credit
The renovation cost estimate helps you to plan your residential or home renovation correctly. Thanks to that you can do all work efficiently and above all – on time. In the case of a cash loan, the cost estimate is only a form of help and navigation. On the other hand, when taking a mortgage renovation loan, you are forced to prepare an exact cost statement that the bank can accept or not. Importantly, you can’t deviate from your renovation plans or suddenly make explicit changes to them without consulting your bank. Invoices and repair accounts must also be provided to the financial institution confirming the cost estimate data which prove that the funds received were used as intended. Specialists often repeat that plans include contingencies for unforeseen expenses. Therefore, always apply for a loan higher by approximately 10% than the cost of the announced renovation.
What if the bank does not want to grant a renovation loan?
If after the application for a renovation loan the bank does not grant the funds, it does not mean that you have to say goodbye to your dreams of planned changes. You probably need to modify your actions a bit and choose a cheaper solution. If the renovation is to be small and its main purpose is to refresh the walls quickly, use a credit card. This option will allow you to get a few thousand dollars quickly, whose repayment will not be burdened with too high interest. The credit card can also be used to perform regular, small renovations, which after a few years will make up a major renovation revolution in your four corners.
Non-bank loans are another option, which is a quick way to get the cash you need to make the necessary renovations. This solution is recommended when the bank rejects subsequent loan applications. Online loans can often be obtained even with an ideal credit history and with irregular earnings. Particularly attractive is the way of inference, which is done entirely via the Internet. The quick acceptance of online applications and withdrawals means you have the chance to receive money – in just 15 minutes. Non-bank loans allow not only to obtain express, small funds in the amount of several thousand dollars, but also to borrow larger sums, such as 60 thousand dollars in the Smartney offer. It is definitely easier to dream of a beautifully arranged place when you have the opportunity to take attractive loans or credits. Therefore, take care of your credit history and start renovation, having a detailed cost estimate and renovation plan planned.