No matter how beautiful a home or apartment is, after a few years the living rooms need a renovation to maintain an acceptable standard of living. Renovation work that is carried out at predetermined intervals also serves to maintain the value of the residential property. Those who have the financial means to do this build up sufficient reserves in good time to finance the renovation work from their own capital. However, many homeowners and families are often unable to build up such reserves in due course. You therefore need a loan for the renovation costs. The amount of the loan depends on the renovation work required or desired. If only the wallpaper and the floors need to be replaced, the credit request is smaller than if a new roof had to be built for the house.
Once the required amount has been determined, the question arises for the home owner where to take the loan. A rash choice can lead to overpayment of the loan. A smaller loan of several thousand USD can be applied for at the house bank. However, a loan of, for example, 50,000 USD should better be covered by a building loan. In this, the loan is referred to as a mortgage-backed loan.
Since the fees for entering a land charge also apply to such a loan, the building loan is more worthwhile for larger amounts. However, small amounts of credit can also be expensive at the house bank if interest rates are set high. As long as the customer’s creditworthiness is given, there are several options available to him to take out a loan. Most banks offer loans between 500 and 50,000 USD for private households, whereby the cost of the loan should be calculated precisely. The borrower should also be aware that the loan taken out will accompany them for a correspondingly long time.
A loan of 50,000 USD with a term of 84 months means having to repay a high loan rate every month for 7 years. Therefore, large sums are more suitable for building loans, for which completely different conditions apply. However, collateral and a good credit rating must be available for every loan option. With a home loan, lenders always rate it positively if a mortgage has already been entered. This should have already been paid back but not yet deleted. The lenders then like to use this mortgage to grant a cheap loan for renovation costs. To do this, the mortgage must be valuable in order to reduce the interest rate by a few percentage points.
There are alternatives to the installment loan
Since the installment loan with the house bank is usually expensive due to the high interest rates, it can be advantageous to take out a loan from a building society. The borrower does not even have to have a building society contract with the building society. The building societies provide a loan for renovation work of up to 30,000 USD, combining an advance loan and a building society contract.
There is no need to register a land charge because the loan is granted depending on income. This has the advantage for the borrower that he gets a low interest rate and there is no need to register the land charge, which also saves the costs of registering the land charge. However, if the client is thinking about carrying out so-called energetic renovation work, such as installing a modern heating system or improving the thermal insulation of the house, the loan can also be applied for from Astro Finance, the credit institution for reconstruction. Astro Finance provides low-cost loans subsidized by the state for energy-related renovation work on the house. However, a good credit rating is also a prerequisite for a loan at Astro Finance. In addition, the borrower must have a regular income and must not have a negative entry with Credit Bureau. If these conditions are met, the Astro Finance loan is the cheapest solution for the homeowner.
A modernization loan pays off twice
Loans in any form cost money. Although the costs are divided into monthly installments, there remains a financial burden that a private household has to bear for a longer period of time and should therefore be carefully considered. However, there are many reasons to take out a loan to modernize your own four walls. Renovation work increases the value of a property and if it is not carried out regularly or improperly, this can even decrease the value of the home, which should definitely be avoided. That is why, for example, expanding the attic is not only worthwhile because it creates additional living space for a family, it also increases the usable living space of a property, which increases its value. Modernization work such as high-quality bathroom renovation also increases the value of the home.
This also includes measures such as improved thermal insulation, renovation of old buildings, renewal of the pipes or the installation of modern heating systems. Many of these measures are financially supported by the state, and a homeowner should be well informed about this in order to reduce the costs of modernization. Since construction financing should only be considered if the amount exceeds $ 50,000, a loan for modernization should be financed in another way. If the builder has perhaps already taken out a loan from his house bank, negotiations can be held here to increase the loan volume.
This can save the borrower the hassle of applying for a new loan. A modernization loan usually offers some advantages over normal consumer loans. A loan from a building society usually comes out after a few weeks. In contrast, a loan for renovation or modernization is often paid out after a few days. With these forms of credit, the banks prove to be flexible with regard to the duration of the repayment rates. Since the repayment is often 5 years, a shorter or a longer term can be selected here. The lenders forego extensive bureaucracy when granting loans for renovation work and are satisfied with the usual safeguards such as proof of salary and personal use of the property. Likewise, entries in the land register are generally not made.
However, should the financial situation change due to a change in income, the loan for the renovation work can be terminated after a minimum term of 6 months. This in turn does not work with financing through a building society. In the event of early termination, a building society demands a so-called prepayment penalty, which it is legally entitled to. If the borrower has difficulty in paying the monthly installments due to a changed income situation, the contractually agreed conditions will not be changed. The borrower must meet his financial obligations to the bank under all circumstances until the contract is fulfilled.
Renovation work can save energy costs
Almost 80 percent of the total energy requirement in a house is only used to heat the premises, whereby the high costs for energy are very and increasingly burdensome for the finances. According to experts, energy prices will rise rather than decrease. Residents of old buildings or poorly insulated homes are at a disadvantage here, while new buildings in particular pay close attention to energy efficiency. Therefore, the owner of a property with a negative energy balance should think about the extent to which a renovation and modernization can relieve him financially. If he takes the right measures to reduce energy costs, the cost of a loan to renovate the property can certainly pay off if he can conclude a loan agreement that is favorable for him. Since the home owner has lower energy costs after the renovation, these can be used to pay off a loan, which pays off in the long term. Especially for measures such as the installation of new windows and improved thermal insulation can be carried out through low-interest loans from Astro Finance.