Are you planning to redecorate your kitchen, bathroom or garden soon, or perhaps have a new veranda installed? If you do not have enough resources to finance these works or you would rather not get your savings, you can always apply for a loan. You have 2 options for this: the renovation and housing loan.
If you wish to take out a housing loan for your renovation work, you can choose from two options: take out a new loan or borrow an additional amount from your existing housing loan, on condition that you have already repaid a significant amount.
- Existing housing loan: if you have already repaid part of your mortgage loan, you can borrow an additional amount for your renovation work on the basis of a regrouping of your loans. You will then not have to pay any additional deed costs (fees and notary fees, etc.). Only the file costs at the bank for the regrouping of your loans have to be paid. Moreover, you will be able to borrow at the market interest rate, as this is not considered as a new credit opening by the bank.
- New home loan: in the event that the amount available on your credit is not sufficient to finance your renovation work, you can take out a new mortgage (guarantee) on your home. You will then have to pay deed costs. These costs are not negligible because they represent a few percent of the loan amount. In addition, you must also take into account the file costs that apply to the opening of a credit line.
The home loan certainly comes in handy if you are planning to borrow large amounts
This loan allows you to pay off the capital over a longer term, while you can borrow at cheaper interest rates with the reason that the property serves as collateral. In addition, the interest paid on the capital is tax deductible up to a certain amount.
The tax benefit of the home loan is “squeezed” by the high transaction costs and the long term to close them.
The renovation loan is primarily intended to finance renovation and renovation works that must be proven on the basis of an invoice or quotation. The interest rate at which you can borrow is fixed for the entire duration of the loan. Unlike a home loan, you do not have to provide collateral with a renovation loan. In addition, you will not have to pay any file or deed costs.
Moreover, the interest paid on the loan amount is tax deductible under certain conditions. If the work on your home is aimed at saving energy, you will be able to borrow at very competitive interest rates.
The various Regions also provide premiums for this
This loan allows you to borrow smaller amounts (from $ 2,000). Because a renovation loan requires no collateral, the interest rates at which you can borrow will also be higher. Moreover, most banks will offer very competitive interest rates.
It is also easier to get a renovation loan. The application can be submitted very quickly (also online). The supporting documents that you must submit are, moreover, easy to obtain (quotation, invoice, income, etc.)
The big winner?
Choosing between a renovation and housing loan therefore appears to be highly dependent on your needs. The residential loan allows you to borrow larger amounts at more competitive interest rates, but also requires higher costs. The renovation loan is more flexible and requires no collateral or transaction costs.