Posted on Jan 3, 2022 at 7:00 am
If you have just taken out a first loan to buy your main residence, you may be reluctant to take on more debt to finance work. You might prefer to use your contribution rather than going back to the banker box. The option is tempting, especially if the work to be financed is not very expensive and your savings allow it.
Be careful, however, not to dig too much into your woolen stockings! You could reduce your precautionary savings and limit your ability to cope in the event of a hard blow. As an alternative, you can finance your work with a bank loan. With interest rates still at the bottom, the cost of credit will remain very low for you.
The easiest if you have little money on your side: the global mortgage loan
When you want to buy your primary residence, anticipation is key, especially when it comes to financing. To avoid finding yourself in a perilous situation, it is best to look into your finances before signing your bank loan. Why ? Because depending on the precautionary savings you will have left after the purchase, it may be more interesting to integrate a work envelope directly into your loan. Its duration can thus be extended and its monthly payments reduced.
The bank can either release the funds for the work drop by drop (on presentation of invoices), or release the two envelopes at once. This last solution allows you to buy the main residence and start the work at the same time.
However, be careful with coordination: the accommodation may be uninhabitable during the work! You will therefore need a plan B to accommodate you while waiting for them to be completed. Additional costs that can be complicated to bear if you have already started to repay your credit.
The solution: ask the bank for a deferred monthly payment for an interim fee. You will not start repaying your loan until you have placed your boxes in your new home.
For small-scale work or unforeseen events: the work loan
The bank refuses to integrate the work into your mortgage? Do you want to redo your kitchen after buying your home and your precautionary savings are too low? In this type of situation, consider taking out a dedicated loan. It is often of a shorter duration than that for the acquisition of the main residence and is obtained more easily. You can even try to negotiate with your banker to smooth the monthly payments of your two loans.
However, this is not a quick fix because the conditions set by the bank are not always to your advantage. In particular, it decides on eligible work and sets a maximum amount. This ceiling is not surprising, but we must not forget that your debt capacity will already be eroded by your first loan.
You will therefore not be able to borrow as much as you want, especially since work loans are more expensive than mortgage loans for the acquisition of property.
The case of the zero rate loan (PTZ)
The zero rate loan – PTZ for close friends – is a line of loan that complements your main credit. It can finance up to 40% of the amount of the acquisition, provided that the work allows for energy savings or improves the existing one. PTZ is granted according to certain resource levels and according to geographic area. Suffice to say that not everyone is (unfortunately) entitled to it!
The choice of financing the works therefore depends on their nature, your income and your profile. If they are simple and inexpensive, digging into your savings can be a good solution. But don’t hesitate to consider credit to avoid putting yourself in an awkward situation.
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