1 / Equity
The Belgians saved a lot in 2020 following the two confinements who have limited their spending. Putting these amounts to sleep in savings accounts pays very little, with most banks offering the legal minimum of 0.11% interest rate on regulated accounts. Perhaps this is the opportunity to finance your renovations and therefore to invest in your property so that it consumes less energy and gains value with part of your savings.
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- TAX DEDUCTION
If you finance the work entirely with your savings, you will not be able to deduct anything for tax purposes. that’s why it is, in some cases, more interesting to combine equity and borrowing in order to be able to deduct the interest paid for tax.
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2 / Renovation loan and green loan
You can also finance all or part of your renovation via loans typically intended for this type of project, “renovation loans” or “green loans”.
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These are in fact consumer loans with a shorter duration than mortgage loans.. Most of the time, they do not generate administrative fees or mortgage fees. The rates currently offered by banks are more advantageous for green loans than for renovation loans, but to benefit from it, your project must meet a few conditions, which may vary from one bank to another. Also to know that the rates of these credits, unlike the mortgage loan, are never negotiablewhether or not you are a customer of the bank.
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Real Estate Guide
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- 6 ways to finance your renovation
- When demolishing becomes more interesting than renovating
- Renovations that require a planning permit
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The Real Estate Guide, this Saturday 20/2, free with L’Echo. Take a look at the magazine here.
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At Belfius, for example, to obtain a green renovation loan, “a minimum of 50% of the loan amount must be intended to make the home more energy efficient and / or to protect it against theft or fires”, details the bank spokesperson Ulrike Pommée. If we compare the two rates, that of the classic renovation loan amounts to 2.85% (APR) against 1.30% (APR) for the “green”. The BNP Paribas Fortis bank also offers an “energy credit, at the rate of 1.80%, which allows the home to be completely renovated from the moment when 75% of the work is aimed at saving energy”, indicates its door -speaking, Valéry Halloy. For the classic renovation loan, the APR is 2.95%.
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The proposed rates can therefore go from single to double. So remember to compare the rates of each of these two types of renovation loans in different banks. when making your request.
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- TAX DEDUCTION
You can deduct the interest but not the principal repayment of the renovation and green loans as ordinary interest deduction if they relate to a second home or an investment property, but not if it is your own home. The deduction is made up to the amount of the cadastral income declared.
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3 / Mortgage loan
Mortgage credit is more often suitable for major renovations, which require a larger amount. The conditions that apply are the same as when you take out this type of loan to buy your home: negotiable rates, outstanding balance insurance, deed fees, mortgage registration, folder…
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For a mortgage loan, “a personalized proposal is always established. It takes into account all aspects of the file, the specific financial situation and the customer’s banking relationship “, explains Ulrike Pommée, who adds:” for the renovation, a financing plan must be established and the amount of the loan will be put available in installments, as the work progresses “.
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- TAX DEDUCTION
For your own home, it is not possible to benefit from tax reductions since the housing bonus was abolished in 2017 in Brussels and in 2020 in Flanders, and in Wallonia, the housing voucher is reserved for acquisitions (possibly accompanied by a renovation financed by the same loan).
Most if it is the renovation of a second home or an investment property, you will be able to benefit from the tax deduction of interest and the repayment of capital. You can deduct interest and principal from your reported real estate income, reducing your taxes on that income, or even eliminating it altogether.
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4 / Reversal of outstandings
For those who already have a mortgage loan, taking over outstanding amounts is an option. Your bank is actually giving you back an amount that you have already repaid. This is a discount available to part or all of the credit. “A repossession of assets means that you reuse the mortgage created for a previous loan in order to guarantee a new mortgage”, indicates the spokesperson for Belfius.
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If, for example, you have already repaid 50,000 euros of capital on your current loan, you can request a recovery of outstanding amounts of 20,000 euros, or even these 50,000 euros, it all depends on your borrowing capacity and what the bank is ready to accept. Some do it only from a certain amount (10,000 euros, in general).
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The advantage of this process is that it generates little cost, most often simply administrative fees around 400-500 euros, depending on the banks. The loan is taken over at current market conditions (current rates), not at the terms of the initial loan.
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You can also request a repossession of an outstanding loan that has already been repaid, as long as the mortgage is still running.. It will then depend on the remaining term of the mortgage.
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- TAX DEDUCTION
Even if the recovery of outstandings concerns a loan concluded before the 1is January 2016 in Wallonia and before 1is January 2017 in Brussels, it will not be possible to benefit from the housing bonus or the housing check on this new loan “in the loan”. For indeed, the recovery of outstanding amounts is considered by the tax authorities as a new mortgage loan. The tax regime is therefore the same as that of a new credit (see “mortgage loan”).
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5 / Group insurance
Another track is that of the reserves that you have built up as part of a second pillar pension plan, in other words a group insurance for employees or an EIP / PLCI or CPTI for the self-employed. Three formulas are possible: the advance, the pledge or the reconstitution of capital.
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The advance: the insurer releases part of the amount of your reserves – between 60% and 75% – to finance the renovation of a property located in the European Economic Area. The advance allows you to pay no mortgage registration fees or re-use indemnities in the event of early repayment. But knowing that an insurer earns money on the reserves it manages, it will be necessary to reimburse the shortfall.
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Therefore, three options are available to you: the payment of annual fees calculated on the basis of the amount withdrawn, which will actually be deducted from the blocked reserve (therefore, the latter will be reduced each year by the amount of the fees). This system is only offered to the self-employed, not to employees; the payment of monthly interest so that the insurer continues to provide a return on the entire reserve; the capitalization of interest through which the insurer deducts from the blocked reserve all the interest that has accumulated during the years during which it granted you an advance.
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The pledge: you pledge your group insurance contract in order to negotiate a new mortgage loan with your bank by offering it an additional guarantee. From that moment, it is your bank, the credit organization, which becomes the beneficiary of the contract. This is a document signed under private signature which does not generate any costs.
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The reconstitution of capital: you use the projected capital, and not the actual capital, to obtain a fixed-term loan like the bullet loan. It is then the insurance company which grants you the bullet credit which mortgages your home because it is not certain that you will indeed constitute the capital projected following a change of life, of course. For the self-employed in a company, it is the company that pays the pension insurance premiums and the interest on the loan is paid in person. The capital built up is used to settle the bullet credit.
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- TAX DEDUCTION
It all depends on the chosen formula. Some are more advantageous than others.In the case of advance, if you decide to pay interest so that your insurer continues to offer you a return on the entire reserve, you can deduct the interest paid from your real estate income as part of the repayment of a real estate loan. If, on the other hand, you decide to pay fees or opt for an interest capitalization, you will not be able to deduct anything at all.
For the pledge, if you take out a new mortgage loan, you can then deduct the interest and principal from your declared real estate income, but only if it is an investment property or a second home (read above).
In the case of the reconstitution of capital, you take out a bullet loan in which you only repay the monthly interest and the principal at the end of the loan. There too, you can also deduct the interest reimbursed if it is a second home or an investment property that you renovate. But in general, it is extremely rare for a financial institution to accept a bullet loan for a clean home; most of the time, therefore, these are loans intended for housing other than family housing.
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6 / Walloon Renopack or Brussels Green Loan
The Brussels and Walloon Regions each offer an advantageous loan formula to finance renovation work under certain conditions.
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And Wallonia, the “Renopack” is in fact a 0% installment loan granted by the Walloon Social Credit Company. The minimum amount that can be borrowed is 1,000 euros with a maximum of 60,000 euros. To be eligible, you must be an occupying owner of a home in Wallonia with a maximum of two dependent children and be at least 18 years old. The dwelling in question must have been occupied for the first time at least 15 years ago. You must have benefited during the penultimate year from globally taxable income of less than 97,700 euros. And the work, which can only begin after the signing of the deed of loan, must be carried out by a contractor. The works concerned are, for example, the installation of gas, electricity, an energy audit, replacement of the roof, defective frames, removal of dry rot, insulation of the roof, walls and floors, etc.
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In Brussels, there is the “Brussels Green Loan” which is a 0 to 2% credit offer allowing individuals to finance energy saving work. Eligible works must meet the conditions for energy premiums and the funding must be at least 500 euros and can reach the sum of 25,000 euros maximum. This loan can finance the installation of photovoltaic panels, a heat pump, a solar water heater or even insulation, ventilation and efficient heating work. Two credit formulas coexist: a consumer credit with an APR of 0 or 1% over 10 years maximum (the 0% rate is applied to people whose annual income does not exceed 30,000 euros for a single person and 60,000 euros for couples / cohabitants); or a mortgage loan with an APR of 0 to 2% over 30 years maximum (the rate of 0% applies to people whose annual income does not exceed 15,000 euros).
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