In order to preserve the value of a property in the long term, it is necessary at regular intervals to renew or optimally maintain the building as well as its interior. In addition, housing loans are low-cost financing options that are still readily available in most cases. The amount of the disbursed amounts is very individual to regulate, on average, they are between 1,500 euros and 50,000 euros.
Measures that can be taken with this form of financing
- Repair of heating or interior equipment
- New garden design
- Functional annexes to the building
- Construction of a carport
- Redesign of the kitchen including appliances and furniture
- Extension of the attic
What concrete a real estate owner wants to finance with his home loan, he must clarify with the funding institute. Most of these grant a relatively large margin, the exact measures are often not mentioned in the financing contract. This also leaves a relatively large amount of freedom in the availability of money. However, the principle applies that the money may be used exclusively for the modernization, renovation or redesign of the home.
Important requirements for a residential loan
To receive a residential loan, the most important requirement is that the borrower actually owns the apartment or the house. Anyone who only lives for rent and planning renovations, this must usually clarify with the landlord, without whose approval no structural changes may be carried out. Another requirement for a home loan is a good credit rating, as is expected in most other forms of financing. Its primary purpose is to minimize the bank’s default risk. This usually retaliates in consequence with favorable interest rates. If you can not get a commitment for the residential loan because of your creditworthiness, you can try it with financial institutions that do not require Schufa information or proof of income, but these are usually overpriced. A helpful measure for getting funding is either an additional applicant with a regular income or other security such as owning property. Even a personal loan from friends or family can be an alternative for a residential loan, after all, the interest and conditions of repayment can be completely individually and freely agreed.
Hardly any more costs for the home loan
Unlike mortgage loans and other forms of finance, a residential loan does not require a land register entry for the bank. There are no additional costs such as a notary’s fee or financial expenses for entry in the land register. In principle, most financial institutions are satisfied with copies confirming ownership of the property. Once the loan is taken out, the claimant vouches by means of a pawn order to avoid potential payment defaults. Apart from that, of course, the immobile itself can serve as security. Since home loans are used to maintain value and even sometimes to increase the value of the building, many banks provide support in the form of low interest rates.
Residential Credit – Mortgage Credit: What’s the Difference?
Even if both types of financing revolve around the property, they must not be confused. The mortgage loan is a secured loan that uses the apartment or the house as a kind of pledge. This incurs additional costs for the notary and land registry. Apart from that, the bank has the option to auction the property if the agreed installments are not paid. Basically, the amount of credit for mortgage loans is also significantly higher than for residential loans.
Keep the loan low
As meaningful as a home loan for the renovation or maintenance of a property is, it is for a certain time an extraordinary burden on the household budget. For that reason alone, it makes sense to keep the loan amount as low as possible. Ratsam is about to go directly to dealers or furniture stores or craftsmen in a good bargaining position for the price. That is the case when cash payment is possible. And this is exactly what is possible through a residential loan and brings every landlord willing to renovate in a good starting position for price negotiations. In addition, it makes sense to carry out certain renovations such as wallpapering, laminate laying, etc., or have them done by a competent layman. Thus, the costs remain manageable and quality losses are still excluded.
Pay attention to some aspects of home loans
As already stated, a residential loan is not comparable to a traditional financing of the home. Basically, this is a traditional installment loan or a very classic annuity loan, which is earmarked by the bank. Thus, borrowers should consider some aspects that would mean a profit in repaying the loan amount. For most financial institutions, there are special conditions that make the loan cheaper and should not be missed by any borrower. This includes, for example, the option of special repayment, which allows partial amounts to be repaid between normal installments. This shortens the term of the loan significantly. As the bank escapes interest, often a so-called prepayment decision is charged. It is therefore important to ensure directly with the credit agreement that the usual ten percent of the loan amount can also be repaid unscheduled. A free total amortization can make sense. Anyone who unexpectedly can claim a larger inheritance or otherwise come to a considerable sum of money is able to pay off the remaining amount at once.