Renovating a house or building is the dream of many people who find themselves fantasizing about more or less important changes to optimize space and make their home more efficient. However this kind of intervention could involve high costs, requiring a liquidity that is not present at the moment. But this does not mean that you need to abandon your dream, as you can get the money you need through a loan or a mortgage ! But what is the difference between these two financial instruments? Here is a simple guide for an informed choice.
Apply for a home loan
The loan is a form of lean financing that allows obtaining sums of an average amount from 5,000 to 75,000 USD, to meet monetary needs of various kinds, such as for example, renovations, maintenance and purchases of furniture or appliances.
Depending on the purpose of the loan it is possible to choose between:
- Finalized loans, linked to the purchase of a specific asset (eg the formulas proposed for the purchase of a household appliance or a car), which normally provide for a very brief investigation and a response on the almost immediate feasibility
- Non-finalized loans, for which it is not necessary to produce documentation certifying the use, which therefore can be used freely, to obtain additional liquidity to be allocated to what is desired
Loans have a maximum duration of 120 months (10 years)
- Delivery times
The loan provides for short delivery times of between 15 and 30 days
- No mortgages / guarantees
For the loan it is not necessary to set up a mortgage, and in the case of the Assignment of the Fifth, it is not even necessary to have a guarantor
- Tax relief
Those who choose the loan cannot benefit from tax relief
Characteristics of the mortgage
The mortgage is a form of financing that allows you to get high amounts of money to meet the purchase of a property or its renovation.
The mortgage has a duration of up to 30 years. Furthermore, it is mandatory to indicate the purposes for which it is requested
- Delivery costs and times
Unlike the loan, the loan is subject to higher preliminary costs. Delivery times are also longer, as the credit institution must assess the existence of conditions that guarantee repayment of the loan
- Guarantees / mortgages
In the case of a mortgage, guarantees are always required, usually represented by a mortgage on the home
- Tax relief
The loan gives the possibility to deduct part of the interest paid according to the law.
Home renovation: loan or mortgage?
The first factor to consider in order to consciously choose between a loan or a mortgage is the amount of the sums necessary to restructure the property. In the case of small amounts, the loan could be cheaper, due to the reduced delivery times and the absence of additional guarantees.
Delivery times should also be considered : the shorter the deadlines and the more positive the loan has.
In the same way it is important to consider the total costs of the operation : for the loan it is sufficient to consider the APR, which includes the total costs, while for the loan the costs related to notary and mortgage costs must be considered in addition.
The timing of repayment of the loan also takes on a significant aspect : the loan can have a maximum duration of 10 years, compared to the mortgage which can extend up to 30 years. The consequent monthly installment could significantly affect the choice of one of the two solutions. In particular, choosing the loan with Cession of the Fifth the monthly installment never exceeds 20% of the net salary or net pension, for a loan that is always sustainable.
The presence or absence of a guarantor or a mortgable asset certainly acts as a filter in the choice of the two solutions: for the loan it is necessary to have additional guarantees as well as a property of mortgageable property, for the loan no mortgage is provided and in the case of the Transfer de Dalpo is not necessary to have a guarantor.
Benefits of the Cession of the Fifth
By choosing a loan with Best Bank you will also have additional benefits such as:
- Fixed rate and constant installment for the entire duration of the loan
- Convenience of return, as the monthly payment will be withheld directly on the salary or net pension
- Sustainability : the installment can never exceed 20% of the salary or net pension, to always guarantee an adequate income capacity of the applicant
- Security : insurance is always included, to protect the applicant and his family
- Requested even in the presence of other loans or previous payment delays: the Cession of the Fifth formula lends itself well to debt consolidation (to renegotiate other loans in progress) and can also be granted to those who have received reports for previous payment delays