Renovation of an apartment covers expenses of several or even several thousand zlotys. Often, we have to apply for a loan to finance it. Depending on the expenses we plan, we may decide on a different type of financing. What loan for renovation should you choose and what to look for? What pays off the most?
How best to finance the renovation of a house or apartment?
Due to the fact that the renovation of the apartment is associated with considerable expenses, we often decide to cover all or part of the expenditure from the loan.
However, we must adapt the loan for the renovation of a house or flat to the type of needs. It depends on what type of financing we decide on. So before we apply for a loan, let’s think about exactly how much money we need. On this basis, you need to decide on the type of loan that will be best for us. We can opt for a cash loan, mortgage or mortgage loan. Each of these solutions has its pros and cons.
Below we suggest what to look for when deciding on a specific loan for home renovation.
Cash loan for minor refurbishment
If the renovation we are planning consumes no more than several thousand zlotys, a good solution would be to take a cash loan to finance it.
In this case, we can count on a quick decision and a small amount of formalities. The bank will inform us about its decision usually the next day, and sometimes even a few hours after applying for a loan. To get a cash loan, all you need to do is complete a minimum number of formalities: most often, you only need an ID card and a document confirming the amount of income we receive (banks often require a certificate of earnings and a certificate of employment from the employer).
The maximum repayment period that we can count on in the case of a cash loan is 10 years – 120 monthly installments. In turn, the maximum amount we can apply for in the case of a cash loan is about PLN 60,000. In the case of such a large amount, however, a better solution may be a mortgage.
It should also be taken into account that a cash loan for renovation is more expensive than a mortgage. The interest rate reaches even a dozen or so percent per annum. So let’s take a good look at the offers proposed by banks to choose the most advantageous one. In our cash loan comparison website you will find a list of various offers.
Mortgage for an expensive home renovation
If you are planning a costly renovation of your house or flat, the best solution would be to apply for a mortgage.
However, the renovation mortgage has its limitations. To obtain it, you must be the owner of the property. Nor can she be charged with a mortgage.
In the case of a mortgage, one should take into account that the number of formalities necessary to complete is much higher than in the case of a cash loan. We will also wait much longer for the bank’s decision to grant the loan – it may take up to a month.
However, thanks to mortgage collateral in the case of a mortgage for renovation, we can count on lower interest rates and longer repayment periods. The mortgage interest rate is around a few percent. The repayment period can be extended up to 20 years, thanks to which monthly installments will be lower and will not burden the household budget.
There are some additional formalities associated with the mortgage. Before submitting the application, estimate the budget and make an estimate of the renovation works. A bank adviser will assist us in preparing the document. Of course, if during the renovation it turns out that we unexpectedly need more money, we will be able to apply for an additional loan amount. However, we will wait for money up to several weeks. In the case of a mortgage for renovation, it is also necessary to evaluate the property. The maximum loan amount cannot exceed 80% of the property value. Importantly, in the case of a mortgage for renovation, banks do not require their own contribution.
The mortgage interest rate is favorable, but we have to take into account additional fees. The cost of property valuation is around PLN 300-600. Due to the fact that a mortgage must be established, it will be necessary to pay court fees for registration and subsequent deletion of the mortgage.
We should also remember that at the end we have to settle accounts with the bank during the renovation works and document their cost by presenting invoices. The bank may also carry out an inspection in a renovated apartment.
Banks offer a mortgage for renovation under various conditions. In our mortgage comparison website you will find various offers. It is worth to read them and make an informed decision.
Or maybe a mortgage?
The third option is to take out a mortgage. She is exempt from certain formalities that make it difficult to obtain a mortgage for renovation.
In the case of a mortgage loan, it is not necessary to make an estimate of the planned renovation. As a result, after the work is completed, we do not have to settle the costs incurred before the bank.
The feature that connects the mortgage with the mortgage is the type of collateral. Both types of financing are secured by a mortgage. Therefore, in the case of a mortgage, we must also be the owner of the property. The bank will ask you to prepare a property valuation (cost around PLN 300-600), and the maximum loan amount will not be able to exceed a certain percentage of the property value.
The renovation mortgage loan bears an interest rate higher than the mortgage loan. While the mortgage interest rate can be as high as 3%, in the case of a mortgage loan we have to reckon with a slightly higher amount. The minimum interest rate in this case is about 5-6%.
A mortgage is a golden mean because the number of formalities is smaller than in the case of a mortgage, but the interest rate is not as high as in the case of a cash loan – we can also count on a higher amount.
Which renovation loan should you choose?
When making a decision about a renovation loan, answer the following questions:
What loan amount does it need for renovation?
If the amount reaches several thousand – it is worth considering a cash loan. With a larger amount, you should start considering a mortgage or mortgage.
When do I need money for?
If we want a very quick decision, let’s put on a cash loan. We will have to wait several weeks for the mortgage to be granted. We will get a mortgage loan a little faster.
Do I own a house or flat?
If the renovated house or flat is not our property, we will not receive a mortgage or mortgage.
Is the house or flat burdened with a mortgage?
If so, we will not receive a mortgage or mortgage – the only solution will be a cash loan.
Do I care about a low monthly installment?
The lower monthly installment will be related to the longer repayment period. If we are ready to tie up with the bank for a longer time, at the expense of obtaining a lower monthly installment, let’s opt for a mortgage. We will repay the cash loan faster, but the cost of the monthly installment will be higher.
Summary: the best loan for renovation
When choosing a renovation loan, we need to consider our needs. If you are planning a general refurbishment of an apartment, it is more profitable to bet on a mortgage. If the renovation is small, it is not worth spending a lot of time on the formalities associated with it. In the case of a mortgage, the interest rate will be lower, but we will incur additional costs related to the valuation of the property or court fees. If the amount you are applying for is low, you should not overpay for formalities. It is better to finance a minor renovation with a cash loan.