Many homeowners finance their renovation with a second mortgage or an increase in their current mortgage. Is that wise?
A recently published special edition of Lender: Special Item Consumer Credit shows no. The total cost of taking out the mortgage and the repayment and interest are often higher than if the renovation were financed with a personal payday loan of 10 years, despite the higher interest rate of a consumer credit.
The longer term of the mortgage is repaid less quickly
So you pay more interest than with a personal payday loan. And then when taking out a mortgage there are also additional costs such as: appraisal, consultancy and notary fees. As a result of the stricter lending standards for mortgages, Lender expects that borrowing for renovations, such as a personal payday loan, will increase in popularity.
Take out a personal payday loan for renovation
Taking out a personal payday loan therefore seems a better option than a mortgage to finance your renovation. With a low amount and a short term, you will be cheaper with a personal payday loan. In addition, you also receive interest relief on a loan that you take out for an improvement to your home.
Financing refurbishment remains custom work
The way in which you want to pay for your renovation remains customized. There are many factors that play a role that you need to take into account. In addition to the cost aspect, there are other considerations that you have to make when choosing a personal payday loan or increasing your mortgage. Raising a mortgage takes time and effort. Given the stricter lending standards, there is a chance that your personal situation will not be accepted by the lender. The tax deductibility goes down. This has consequences for both taking out a second mortgage and a personal payday loan. But the consequences are longer with a longer duration (30 years) than with 10 years.
Taking out a personal payday loan involves less and you can repay early and free of charge with most lenders.