Generally, a house or an apartment always reflects the personality of its occupant. By purchasing a new home, you will therefore want to transform it entirely to your tastes so that it looks like you. The purchase of this property then involves some work to have a new kitchen, a new facade or a new roof, etc. Only, can you afford to finance them with your mortgage? If not, here are some solutions to fix it.
1. What choice to finance its work?
Doing work in a house is an important project that often requires custom financing. If you do not have the means, several banking solutions can then meet your needs. To know:
Personal savings is probably the easiest alternative to finance your work because it allows you to get a loan without having to justify the use of money from lenders. This also allows you to finance yourself the purchase of the materials necessary for carrying out the work (cements, plaster, concrete blocks, irons, etc.). It also saves you from any guarantee, insurance and interest costs linked to conventional mortgage loans. Just be careful to properly assess the amount of work at the risk of spending more money than expected.
So, if you want to buy a house in town whose price is $ 300,000 and the cost of works is $ 25,000. However, you only have savings of $ 60,000. Rather than spending all your budget on intake, you are winning by using only 10% of it, that is to say 30,000 $. You then keep the rest of your money to finance your work without having to go through the bank.
The consumer loan:
There is also the consumer loan which is a credit whose amount does not exceed $ 75,000. At least, this limit was revised in 2016. Quick credit, it allows you to touch your loan in just a few days. Then, it can be easily obstructed because it does not require any surety, mortgage, or insurance obligation. Some organizations even offer a loan request without proof.
The consumer credit is in this sense, very interesting. But like all things, it also has some drawbacks. Indeed, the repayment period is short because it is from 1 to 7 years maximum. He is also criticized for his loan rate and his high monthly payments which may prevent you from taking out other loans for your future projects. Before taking out a consumer loan, it is then necessary to think twice, especially if you plan other projects after your work. Instead, prefer the works credit.
Otherwise, you can turn to the mortgage which allows you to finance an acquisition and / or work in a home, mainly if the cost of these exceeds 75,000 $. The advantage of this loan is to be able to benefit from a better rate . The only downside to the credit agreement, the bank usually requires the borrower proof of work and an accurate quote to grant the necessary funds.
Grouping of credits:
Finally, another alternative is to combine several credits to reduce the monthly payments. It is interesting because, when you already have one or more credits in progress to finance your work, it relieves your monthly expenses by combining in a single loan these multiple loans. In addition, thanks to this type of financing, you benefit from a reduction in the monthly debt ratio thanks to a rescheduling of the loan period.
2. The advantages of integrating the works into your mortgage:
Including the expenses relating to the works in the home loan allows you to enjoy several advantages:
- you benefit from a lower mortgage loan rate compared to the consumer loan
- you can finance your work yourself over the long term, which is not possible with the consumer loan
- as the work progresses, the bank releases funds accordingly since it pays the contractors itself after presentation of the invoices
- if in addition to the mortgage, you apply for a consumer loan, their sum is added and their total cost will not help your financial situation. However, if you integrate the work into the mortgage, you can smooth their amount to please your portfolio. Thanks to this credit consolidation, you will only pay one monthly payment to the bank instead of several.
- The icing on the cake, you can declare the payment of monthly payments as long as the house is uninhabitable. This saves you the obligation to pay both your rent and the monthly payments linked to the loan taken out. Only you will have to pay interim interest.