Renovation: what are the financial options?

28 Jun

Do you want to make an expansion of your kitchen for years? Would you like to renovate your entire house? Or have you just bought a house with a lot of potential, but what still needs to be done? Then you may want to take out a loan so that you can pay for your project. But what type of loan is suitable for you? Which conditions are important? Approximately how much can you borrow? And which alternatives are available? Discover the answer to all your questions in this guide from OneTopNotch, because for such a large investment you would rather not go ice-cream overnight?

A. What is the renovation loan?

A. What is the renovation loan?

A.1. Explanation

A renovation loan is a personal loan where the credit is used for renovating or renovating a property. With this credit you can do odd jobs at home, for example for an extension, resale, renovation or just a makeover. In this way you do not need to obtain your savings and you immediately have the amount of the investment at your disposal. You then repay the borrowed amount at your own pace, in accordance with the lender and based on your financial capacity. This way your house can be renovated without problems.

A.2. Who can apply?

A.2.1. Requirements

To be able to borrow money for a renovation or renovation, you must be in possession of the property. For example, if you are a tenant, you must first receive a registered authorization from the owner before you can apply for a personal loan. Without this authorization, the owner can claim the property in its original state at the end of the rental period, which will entail the necessary additional costs.

A.2.b. Which documents are needed to renovate your house?

Before you can get a loan for a renovation or renovation, various documents must be supplied to the lender. Depending on your situation, the following documents may be required:

  • The purchase agreement when you have purchased the property to be renovated;
  • A copy of your proof of identification;
  • Building permit, if required (not all types of renovations or renovations require a permit);
  • Tax returns for the last two years;
  • Specifications of the planned work;
  • Your current payroll (or invoices if you are self-employed);
  • The latest notification about your property tax;
  • A professional estimate of the property

A.3. How much and how long can I borrow?

To be eligible for a renovation loan and thus renovate your home, you must be able to prove to your bank that the loan is actually used for this purpose. This can be done by showing the invoices or quotes of the architect or contractors that you employ to the bank. This is very important because you will not have access to the requested loan if you fail to provide this proof.

A.4. What type of renovations can I finance?

Are you going to renovate your house? With the renovation credit you can finance various types of renovations or renovations in your house. The renovation loan can be used, among other things, to finance a new kitchen, a larger bathroom, a spacious veranda, but also that beautiful swimming pool that you dream of every summer.

However, make no mistake, it is also possible to have less drastic work carried out with the help of a renovation loan. This includes the replacement of your window frames, the replacement of your plumbing, the installation of a new alarm system or the purchase of a secured door.

B. What are the alternative financing options?

B. What are the alternative financing options?

B.1. The decoration loan

The decoration loan is part of the unallocated credit, also referred to as an all-purpose loan, which can be used to finance the furnishing of your home. This allows it to serve as an alternative to a renovation loan. With this loan you can choose from two different types of financing:

  • The credit line allows you to tap into a reserve ‘potty’ with money if necessary. The interest rate and the limit of the amount that can be released are set at the start of the process. However, it is a form of flexible credit: as long as you meet your monthly obligations, you will have access to renewed reserves.
  • With the installment loan, the amount of the loan and the interest are set in black and white when the loan is taken out, so that it is fixed during the loan period. The Annual Cost Percentage (APR) is generally lower than with a credit line. When you experience problems with paying off the monthly payments, there is often an option to change the repayment criteria.

B.2. The green energy loan

B.2. The green energy loan

To encourage sustainable living, some financial institutions offer green energy loans with favorable conditions. But when can you apply for a green energy loan? You are eligible for this loan if the planned renovations or renovations are intended to reduce the energy consumption in your home.

The criteria and conditions for an energy loan differ per lender. That is why it is essential to compare these loans well and to discover through a simulation which loan best suits your project.

In general, the energy loan covers:

  • The installation of solar panels;
  • The installation or renewal of roof insulation;
  • The Installation of a heat pump;
  • Purchase of a new heating boiler;
  • Various other, ‘green’, solutions to reduce energy consumption.

B.3. The home loan

B.3. The home loan

The home loan, also called mortgage loan, is usually used for the purchase of real estate (for example land, apartment or a house). To be eligible for a mortgage, the loan must be greater than € 50,000. Since there is a mortgage on the property, meaning that it is used as collateral, the interest rates are often more attractive than with a standard loan. The lender runs less risk because the property can be seized in the event of default.

Via these two options you can use the home loan for your renovation:

  • You can take out a new mortgage when the required amount is very high and you do not yet have a mortgage loan. The costs for this credit will vary between 2% and 3% of the total amount of the loan, plus the opening costs of the credit.
  • You can use your current mortgage loan if you have already repaid it in part, at least up to the amount of the planned investment. To do this, request a refinancing (credit restructuring) of your credit so that you avoid a new loan. However, the lender will charge additional costs for this.

C. Do I need an urban development permit for my renovation?

C. Do I need an urban development permit for my renovation?

A building permit is a written authorization from the municipality that gives permission for a renovation or renovation. It is a necessary document that should your project qualify for it, it must be obtained before the start of your project. You must apply for a building permit from your municipality in the following cases:

  • Construction of a garage, home, business premises or horse stable;
  • Home expansion;
  • Construction of a separation wall to demarcate a plot or to separate grounds;
  • Demolition of a structure;
  • Installation of a wind turbine or solar tracking system;
  • Restoration;
  • Creating a home in an existing building;
  • Reorganization of spaces indoors and outdoors;
  • Adapted main function of the property (for example rental, tourist accommodation, commercial operation)

On the other hand, certain minor renovations or renovations do not always require a building permit. These conditions may differ per municipality, therefore it is important to have your information informed.

Some examples of small buildings that do not always require a permit:

  • Replacement of the roof;
  • Addition of a skylight or chimney;
  • Installation of windows in a wall;
  • Creating extra storage space by rearranging an old extension;
  • Expansion of a building to create a laundry room or garage that belongs to the house;
  • Build a porch or garden shed;
  • Construction of an isolated outbuilding or uncovered swimming pool;
  • Installation of solar panels;
  • And much more.

For more information about the different exceptions and conditions for building permits, you can consult the website of the  Flemish government.

D. Can I apply for a renovation loan online?

D. Can I apply for a renovation loan online?

If you want to take out a renovation loan, you can often arrange this online. This is often easy, but sometimes it is also possible to get even better conditions. But what steps do you need to follow to find out?

  • Make an estimate of the costs that the project will require based on different estimates and market studies.
  • Compare your desired loan through our comparison tool. State the amount and the term of your loan and compare all offers on the Belgian market.
  • Then find the loan that best fits your profile.
  • Finally, contact the lender.

Here we explain the process in more detail: How can I apply for a loan?

As you understand now, there are countless ways to finance a renovation or renovation of your home. To come to the right financing arrangement for your project, it is essential that you study your project well. This way you can see what the most important steps are to make your dream come true.