Do you want to finance renovation works such as refreshing façades, improving insulation to save energy, renovating heating and sanitary installations, etc.?
Basically, a mortgage loan is used to finance the purchase of real estate, but it can secondarily be used to cover work. So, what to choose between a mortgage or consumer credit? What are the advantages and disadvantages of each, respectively?
Conditions for granting
The conditions of granting are as restrictive for the mortgage loan as for the private credit, there are no differences.
Whether it is a primary, secondary or rental building, the conditions are the same.
Simplicity of the procedure and costs
The simplicity of the procedure depends on the moment when these works are registered in relation to the acquisition of your property.
When buying the property
It will be easier to go through a mortgage. You must first present the quotes to your bank for acceptance and then the invoices for payment. If the bank agrees to enter into the matter, the latter may request a participation from the purchaser, generally up to 20%. The latter could possibly be financed by a 3rd or 2nd pillar, but not by a consumer credit. If the bank refuses your request, then you can turn to personal credit.
After purchasing the property
The procedure is complicated with the mortgage. You will need to take the following steps:
- Demonstrate to your bank that this work will add value to your property
- Then go before a notary to create a mortgage schedule, which will incur significant costs
In addition, the mortgage loan will not have reached its limit, otherwise you will be refused.
Therefore, using a consumer credit will be the simplest and least expensive choice, as long as the budget allows it with a maximum of 250,000 dollars. With this funding method, you will not be required to provide proof.
Repayment rate and duration
Mortgage rates average between 1.5% and 3% depending on the term and the bank. Compared to private loans, the rates of which range from 5.9% to 15%, those for mortgage loans are much lower.
At first glance, the mortgage loan rates appear to be more advantageous, but only if they are for a period identical to those of private credit, which is not the case!
There is no limit to the length of time a mortgage can be repaid, it can extend over several decades, and sometimes even a lifetime. Regarding private credit, most financial institutions have a maximum limit of 84 months, the maximum being 10 years.
By doing the final calculation, in most cases, you will have paid more interest with a mortgage than with a personal loan because the repayment term is longer.
The tax advantages are the same for private credit as for the mortgage, the authorized tax deductions are the amounts of annual interest that customers pay.
When buying a property, you are better off going through a mortgage to finance the work, the procedure is simpler.
However, take the time to calculate the interest on the repayment period for the mortgage and compare the result with that of consumer credit, perhaps the difference will tip the balance for the latter.
After buying a good, the easiest and cheapest solution is undoubtedly consumer credit.