A credit for terrace can be a modernization loan or a simple installment loan. If you own a property, you also want it to remain habitable and safe. In addition, the property should not lose any value. This often involves extensive modernization work. The renovation of a terrace is also associated with costs.
Credit for Terrace – Overview
Anyone who owns a property is often unavailable for renovation work. The terrace which is used in the summer as a second living room, shows first traces of use. The floor tiles were not as unbreakable as announced, here and there they need to be repaired. But many real estate owners also want to rebuild a terrace.
The passage from the living room to a terrace would make the garden even more beautiful. However, these works are associated with costs. Costs not everyone can pay from reserves. Then we are looking for a loan.
But which is the right one. A modernization loan can help. In general, modernization loans are no different from consumer loans. For both types of loan, the bank provides certain loan amounts. The customer pays interest for this. When the loan amount is paid, it is paid with monthly loan installments.
The credit for terrace – the modernization loan
The modernization loan has some special features. The credit for terrace is earmarked. This means that the approved loan amount may only be used for a specific purpose. This purpose was recorded in the loan agreement.
Although the exact work is an issue in lending, but are not enshrined in the loan agreement. As long as the loan amount for the modernization or the building of a terrace at the property use, can be freely disposes of this credit line. The earmarking has but a positive effect. The interest rate of this loan is far below that of a installment loan, for example.
However, this loan will only be given to real estate owners. Tenants are in any case not entitled, without the owner’s consent, to make structural changes to a property. Therefore, they are excluded from the banks in the lending. There are also banks that require the owner to own the property.
Credit for Terrace – Equity Necessary?
If you need a higher loan amount, you may have to prove equity. Thus, part of the estimated costs must be paid out of pocket, so that the rest can be financed with a loan.
As a rule, an equity interest of 20 to 30% is required. Now, if the terrace costs about, once assumed, 25,000 euros, the bank could ask for a share of 5,000 to 7,500 euros, so that a modernization loan can be included. A hedge is not necessary in most cases, however, with very high loan amounts, the bank may require a registration in the land register. This mortgage allows borrowers to receive a favorable interest rate.
This could cause many to voluntarily offer this security to the bank, even if it incurs additional costs.
Pros and Cons – Credit for Terrace
The advantage of a modernization loan is the favorable interest rate through the earmarking. It can be provided a very flexible term and pay sums. By hedging with an entry in the land register in turn lowering interest rates. The disadvantage is that the loan amount can not be used freely, just by earmarking. Required equity lowers liquidity. The registration of a mortgage causes costs.
Credit for terrace – application, payment, calculation
Before a modernization loan is requested from the bank, the costs must be calculated precisely. This is important on the one hand to determine the need for capital, on the other hand banks without recovery plan often did not provide credit.
Subsequently, a loan comparison, such as a loan calculator, should be used to search for loan offers. You simply enter the desired loan amount and the term. The intended purpose is “modernization / renovation”. Immediately, the loan seeker receives an overview of all offers, with the best ones leading the list. For modernization loans, banks provide between 10,000 and 50,000 euros, but there are banks that grant up to 80,000 euros as a modernization loan. Depending on the loan amount, the term can be 12 to 120 months.
Credit for Terrace – Interest Rate
The credit rate should be chosen to be affordable. This can happen with a change in the runtime. The interest rates vary widely. So there is an interest rate of 2.75% to 10.99% and often higher.
The longer the term, the higher the interest rate. Loan seekers should know that in 2014 no processing fees for a loan may be charged. As a rule, banks stick to the verdict. When comparing credit, not only the interest rate should be the focus, but there are other factors that are important.
Credit for terrace – terms of a loan
For modernization loans but also for other types of loans, free special repayments should always be allowed. Special repayments are additional payments that borrowers can make within one year.
Just important for the employee who receives additional payments from the employer over the course of a year and would like to pay them on the loan. As the bank escapes interest, it can charge a prepayment penalty.
Usually about 10% of the loan amount per year is allowed as a special repayment. Thus, the loan can be paid faster without disadvantages arise.
Anyone who has found a provider with the credit comparison can apply for the credit directly via his website online. Often, a preliminary loan commitment comes within seconds, but it will only become final once the creditors have the credit records.
Credit for terrace – alternatives to the modernization loan
Although a modernization loan is aimed at the interests of a client, he wants to maintain his property. Nevertheless, it can often be better to look for another loan.
Since there is the installment loan, which makes do without earmarking. However, interest rates are higher in the installment loan than in the modernization loan, but borrowers can freely decide on the sum.
If you want to buy other things for the renovation or the construction of a terrace, such as new furniture, this can do with a installment loan together. There is then no need to take out another loan, as would be the case with a modernization loan.