Borrowing money, costs money

Renovation: Personal loan or mortgage?

May 23, 2015

Financing renovation costs

If you choose to borrow money for your renovation , you will be faced with the choice: borrow money through your mortgage or with a personal loan? What are the differences between these two forms of borrowing money? When is the loan the better choice and when is the mortgage? This blog answers these questions.

Difference between loan and mortgage

To get straight to the point: since the new mortgage requirements of 2013 and 2014, there is still little difference between a personal loan and a mortgage . Both loans are mandatory and both are tax deductible in certain cases. The main difference is that a mortgage is a loan with an owner-occupied home as collateral.

Now you will not take out a mortgage for a new car that quickly. Something for which a personal loan is very suitable. But when borrowing money for a renovation, it is worth comparing these two forms of borrowing money.

Benefits of a mortgage

I can be brief about borrowing money for your renovation through your mortgage; this is really only interesting if your renovation costs more than 50,000 us dollars. Or if you opt for a loan with a term of more than ten years. Doesn't this apply to you? Then a personal loan is probably the best choice.

Advantages Personal loan

A personal loan has several advantages over the mortgage. For example, it is often easier to take out a personal loan. You do not have to go to the notary and your house does not have to be valued. You notice this in the costs. As a result, the total costs of a personal loan are lower than that of a mortgage. Despite the fact that you often pay a higher interest.

Taking out a personal loan also takes less time. Taking out an (extra) mortgage can take four to six weeks. With a personal loan, you have your money in your account within a few hours after the bank's approval. Handy, right?!

Pay off faster

A personal loan offers the option to opt for a shorter term than with a mortgage. This way you can adjust your loan to your loan goal. This prevents you from still paying while your new kitchen is already due for replacement. You are also more likely to be debt-free. A nice feeling!

Free extra redemption

You can always make extra repayments on a personal loan without penalty. It is even possible to pay off the entire debt in one go. This is in contrast to a mortgage, where you can (generally) make additional annual repayments up to a maximum percentage of the mortgage amount without penalty.

Tax benefit

Another advantage of a personal loan is the tax benefit. The interest of a personal loan that is used to remodel or renovate your own home is tax deductible with the tax . The same applies if you use your personal loan to pay off your residual debt.

Request a quote for a loan

Request a quote for a loan

Hopefully you now have a better idea of ​​the differences between a mortgage and a personal loan for your renovation. Do you want to know more? Calculate on our site what is the best choice for you and then immediately request a quote .

Written by:
  • Dominique Heusschen
  • Credit adviser
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