Renovate on your mortgage loan?On June 30, 2019 by Margaret Wolfe
Sometimes the renovations will happen immediately upon purchase. That is of course interesting. After all, you only have to take out one loan, the mortgage loan for the purchase and the renovations together. And then you only pay a description fee once. This way you can save several hundred euros.
One loan, once mortgage loan costs?
But even if you plan the renovations years after the purchase, you can save on the description costs of the loan. After all, you can withdraw the part of the capital that you have already repaid to the bank without having to go to the notary again, even if your loan has already been fully paid off.
This is possible because a mortgage registration always applies for 30 years, even with a shorter repayment term. In this way you can use the repaid amount of your credit for a second time without new mortgage costs, as long as you remain within a period of 30 years.
Restriction on taking back a mortgage loan
There is, however, an important limitation: you can never borrow more than the amount of the original credit opening. Or with an example: a few years ago you borrowed 100,000 euros from which 10,000 euros have already been repaid, then you can withdraw that repaid amount without having to go to the notary again and therefore also without new costs. As long as the outstanding balance never exceeded 100,000 euros. If you withdraw the repaid capital (or part of it) for a second time, your repayment will of course increase. After all, you must also repay the borrowed capital.
Such a readmission offers, in addition to saving costs, also various other benefits. Since the bank has a mortgage guarantee, it can apply the advantageous rate of a mortgage loan. If you opt for normal financing, the interest rate is higher. Such a loan offers the bank less strong guarantees. With such a re-admission you always receive the rate that is valid at the time of the re-admission (not the original rate of the loan).
Mortgage loan repayment period
Another advantage is that you can spread the repayment over the other term that is specific to a mortgage loan. That makes the monthly repayment easier to carry.
Let us review our example in which you withdraw 10,000 euros. At an interest rate of 7 percent (average interest calculation) and with a repayment period of 20 years (if that stays within the thirty-year period, counting from the opening of the credit), the extra repayment per month therefore comes to 75 to 80 euros. You can also choose to have the repayment period of your new credit with the repayment of the original loan. Then both credits end together and you are relieved of all installments in one go.
If you borrow the same amount through normal financing or revolving credit, maturities of 20 years are not possible. If you borrow the same amount with a 5-year financing, you would cost nearly 200 euros a month.
Affordable mortgage solution
Given the low rate and the absence of costs (unless the bank again charges you for file costs), such as a readmission is always an advantageous solution. But unfortunately that is not always possible. Especially with an older mortgage loan, it sometimes happens that this is (for banking-technical reasons) excluded. Then you will have to get money in a different way. But then it will probably cost you more.