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Real estate purchase plans are not weakening at the start of 2021 and I found it interesting to look at a somewhat specific type of purchase which is the purchase of a home with work and especially how to finance it. Buying a home that requires work has advantages and disadvantages, as you can imagine. Already, we buy with work if we have a little time in front of us. A renovation site is on average shorter than a new construction site, but it all depends on the scope of the planned work. It takes more time to decide before buying and moving in good conditions.
No worry, however, of seeing the good pass under your nose because there are fewer potential buyers for this type of property because – even if the French are handymen – the work can be scary. Which may not be the case after this show. A property with work is often the opportunity to buy at a price below the market or in any case to have a greater margin of negotiation, especially if the energy performance is not there. And, unless you buy a farmhouse in the countryside, you can enjoy one of the main advantages of buying old real estate which is a privileged location, close to the city center, transport, schools and all amenities. And we know that a well located accommodation is the assurance of being able to rent or resell more easily later.
How do you assess the cost of the work? Of course it depends on the project. Do we just want to “refresh”? Or do you have to redo the roof or the electrical installation?
To estimate the amount of major work, we can rely on quotes that the seller could have done. For the aesthetic part, you will find many calculators on the internet to determine the number of paint pots or parquet slats you will need. The real estate agent can also bring you things, especially if he has used a 3D renovation service, you know, those famous before-after visuals that you can see directly in the ads. But above all, we do not hesitate to contact a craftsman or a professional architect who can really cost the work, even if it means carrying out a follow-up visit with him. If the project is ambitious and it is necessary to obtain authorizations from the condominium or a building permit, we do not forget to add a condition precedent in this sense in the sales agreement.
Once we have agreed on the price of housing and we have listed the work and their costs, we must go around financing solutions. We have already mentioned it several times in this program, and I will talk about it once again, but today there is aid to finance energy renovation work, in particular MaPrimeRénov ‘, the Energy Saving Certificate. or CEE – which is managed by the energy suppliers -, the assistance of Action Logement or even the zero-interest eco loan. Do not hesitate to inquire on the site www.faire.gouv.fr because each euro of aid will be one euro less to borrow.
A small note: if you want to make a rental investment in 2021, you must not neglect this part of the renovation work, already to benefit from a land deficit and especially because the war against thermal strainers has already started.
I come to the funding request part. You are not always forced to take out two separate loans to finance the purchase of housing and the work. These can be included in the total amount of the mortgage and therefore take advantage of the attractive conditions thereof: lower rate, longer repayment period and therefore only one monthly payment. All work that is “attached to housing” can be financed in this way. That is to say, upgrading work, insulation, heating, renovation or repair of surfaces (floor, wall, roof, etc.), connection to networks, but also development such as redo the kitchen or the garden or even the addition of a veranda, a swimming pool or a carport. On the other hand, you will not be able to finance the purchase of furniture such as a new sofa or a designer lamp.
In any case, lending institutions require quotes and very often that the work be carried out by professionals. Thus the loan is calculated on the exact sum of the work, and they can also provide for direct payment of the mandated company. According to the latest Meilleurtaux observatory, around 10% of the files concerned a request for an immo + works loan in 2020.
Banks have three ways of including works in the mortgage:
- Either all of the capital is released upon purchase of the property and triggers the repayment of monthly payments.
- Either all of the capital is released upon purchase of the property but the repayment of the monthly payments does not begin until the work is completed, which assumes the existence of interim interest in addition to the monthly payments.
- Either the loan is split in two and the part for the works is released as and when they are carried out, with interim interest.
If you have a fair bit of borrowing capacity or if you want to reduce the amount or the duration of the loan, it is still possible to carry out a trade-off between the works to determine what you are able to achieve yourself or almost. Today, thanks to “tutorials” and DIY courses in specialized stores, you can make great savings by rolling up your sleeves. The material suppliers themselves are increasingly designing products that are accessible to all DIY enthusiasts. And it is also possible to use equipment loan applications or ask other more experienced DIY enthusiasts for a helping hand. According to the site Let me build – an online service that supports individuals in their requests for planning authorizations – 35.8% of French people carry out work without calling on a craftsman. Only 20.1% entrust their project in full.
Depending on your borrower profile and your handyman profile, you must therefore arbitrate between the mortgage with work, combine mortgage and consumer loan or draw from your personal contribution.
To conclude: a purchase with work is a good compromise between a “classic” purchase and new housing. The offer is wider and there is a better chance of finding yourself in the city center, while benefiting from the latest housing standards. The reflection on the financing of the works can be longer but it is compensated by the opportunity to buy less expensive per square meter and to benefit from dedicated aid.
>> In video – Find the whole of the “Great real estate meeting” (Capital / Radio immo) of the month of March, with the wise advice of our experts to negotiate or (re) negotiate your mortgage at best or your loan insurance
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