For your work, consumer loan or mortgage?

That’s it, you’ve spotted the house or apartment you dreamed of, maybe you’ve even bought it! Maybe you wanted to do some work : new kitchen, facelift? This is where the fateful question arises: how to finance your work?

Two options are available to you: dig into your savings or borrow money through a home loan or consumption, so far nothing wizard.

So to guide you in your choice, let’s list together the advantages and disadvantages of each financing solution. The goal is to make this issue clear like rock water. We take the bet?

1. Finance work through a home loan

The property of your dreams deserves some work but you do not have enough cash to finance them. Know that you can add their amount to your mortgage.

If your contribution is greater than the fees ( notary and guarantee), we advise you to deduct your contribution from the main loan. Thus, you will finance the works with your own funds.

On the other hand, if you have a limited contribution to the costs (notary and guarantee) or even lower, you will have to add the cost of the work to the main financing. So the bank will finance your work. Remember that you will be asked to provide contractor quotes or materials. You must have the cost of this work estimated before the loan is taken out.

The advantage of having your work financed by a mortgage is mainly the cost of credit. Indeed, a home loan and much cheaper than a consumer loan (synonymous with a high rate loan for a short time).

Financing of works during a real estate acquisition

Some of the work you do can be included in a home loan. You would be wrong not to take advantage of it. Indeed, if you wait, it will be more complicated to get another home loan just for the job. Your bank will prefer to refer you to a classic, shorter and higher rate loan.

In addition, when setting up the loan with works, the two lines of financing will be adjusted so that the deadline remains the same during the loan period by including these “works”. This is impossible with the personal loan that will only increase your debt and your monthly expenses.

Financing of works alone

Be reassured, to benefit from a mortgage to carry out works by being already owner, it is possible. However, to qualify for a post-financing of works, there are certain criteria to respect:

  • Do not have any guarantee of taking on the property ( surety company or mortgage guarantee), it is often linked to a loan. The bank that will finance the work wants to take a guarantee and be the only one (we understand it). So two possibilities exist: either it buys the current loan, or it is the same bank that already holds the main funding.
  • duration
  • Amount
  • Purpose of the work

2. Finance jobs with your personal savings or a consumer loan

With your personal savings

You finance yourself the arrival of a company or buy the equipment to carry out the work. This seems to be the simplest solution because you no longer have to show your quotes to the bank.

You can say goodbye to the costs of guarantee, insurance and interest related to the loan work!

With a consumer loan: the criteria for financing work with a mortgage

The consumer loan is simple and quick to obtain. There is no real estate guarantee (no deposit, no mortgage guarantee), nor insurance obligation. Attractive is not it?

Not so fast! A consumer loan raises some constraints:

  • The repayment period is very short: it is often between 1 and 5 years (especially since the monthly repayments are high)
  • The loan rate is higher than a home loan
  • It is difficult to smooth a consumer loan to a mortgage so monthly payments are added. This reduces your debt capacity for future projects, or even prevents you from applying for other loans.

We only have one advice: carefully determine your projects in the short and medium term if you subscribe to a consumer credit. In fact, if you do not want to pay too high monthly payments but keep a real debt capacity and an acceptable living balance, go your way. Consumption loan is not always the best solution.

All work is not financeable in mortgage

To find out if your work can be financed by a mortgage, here is the good question to ask: “Will I be able to take away what has been financed? ” The answer is no ? So think about taking a mortgage. Easy !

The answer is yes ? So there is no choice but to finance these works by your personal savings or a consumer loan.

Need an example? Let’s go! A kitchen, a bathroom, a fireplace or a dressing room can be included in a mortgage, home appliances or decoration. Below a table helping you to see more clearly and no longer hesitate during your purchase:

Works to be financed Eligible for a mortgage?
Fully equipped kitchen without appliances Yes
Home appliance no
Bathroom Yes
Outside gate Yes
Garage door Yes
Garden: furniture or green spaces no
Shutters Yes
roofing Yes
cleaning Yes
Works voted by the general meetings of the syndics of co – ownership Yes
Boiler Yes
Floor tile Yes
Fireplace Yes
dressing Yes
Veranda Yes