Flat renovation – Mortgage: how to finance it?

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Renovation of an apartment is usually a serious expense. It is not always enough for us to finance it with current funds or savings. If we do not have our cash for renovation, we can always use the bank’s help. How to finance renovation? Credit can be the solution. The only question is what form of financing, in this case, will be the most beneficial for us?

The first, most important step we need to take is a thorough analysis of the costs that we will have to cover to complete the assumed work. This is important so that it does not turn out that during the preparation, the cash for renovation ran out faster than it might seem, we can take advantage of the offers of banks that facilitate financing renovation. How to do it?

Faced with this choice, the customer may consider two options:

  • A cash loan
  • Mortgage

Flat renovation – cash loan

Flat renovation - cash loan

A popular method of financing is a cash loan. The biggest advantage of this form of credit is that the money can be used for any consumer purpose, and the procedure associated with it is uncomplicated. To apply for a loan, it is enough to have sufficient creditworthiness and a good history at Credit Checker.

The cash loan can be used for any consumption purpose, in which case we do not have to provide the bank with a cost estimate of the purchase of materials or work is done. Cash for the renovation of the house from the loan can be spent at our discretion.

A cash loan is a good solution when the cash for refurbishing the flat exceeds our budget, but the loan amount is not large. Being sure that the loan installment is adequate to our repayment options and nothing prevents the timely payment of monthly installments, this form of financing can be a hit. However, it should be remembered that the disadvantage of such a solution is unfortunately slightly higher interest rate than in the case of a mortgage.

Flat renovation – mortgage

Flat renovation - mortgage

Do you own a property where you need to carry out a general renovation – e.g. replacement of floors, installations, insulation? In this case, the loan will be secured by a mortgage on the renovated property.

A mortgage is usually associated with the purchase of an apartment, but there is nothing to prevent it from being used to renovate an apartment or house. When deciding on such a solution, we must remember that the establishment of a mortgage will be recorded in the land and mortgage register. It is thanks to this that the mortgage is much lower than in the case of cash loans.

Due to the fact that the renovation mortgage is a special-purpose loan, the bank will expect from us an estimate of construction works and the purchase of materials. It may also turn out that not all of our assumptions can be financed with such a loan.

What can we finance in this way?

  • renovation and finishing works, e.g. plastering, laying floors, painting
  • purchase of necessary materials, e.g. paints, tiles, floor panels, etc.
  • permanent equipment: built-in wardrobes, built-in kitchen, sanitary facilities

However, we will not finance portable furniture, decorations, lighting, etc.

What amount will the bank lend us for a renovation?

What amount will the bank lend us for a renovation?

In any case, a mortgage for renovation will be an amount determined individually. The bank will estimate the amount of your loan collateral using an appraiser’s valuation.

He will do it on the basis of the value of the apartment after completing renovation or construction works. The value of the valuation after renovation should reflect the market price, i.e. it should be similar to another real estate with a similar area, location, and standard.

Compare bank offers

Regardless of which loan you choose, it’s worth comparing the bank’s offers. Differences in fees and additional costs can be large. It is worth considering an extract that will help you choose the right offer and explain any doubts. It will also help us to calculate creditworthiness, check our history in Credit Checker, submit an application and complete all necessary documents.