Pay for Conversion: Second Mortgage, Personal Loan or With Savings?

A renovation can be nice in the papers. You can use your savings, take out a second mortgage or a personal loan. But what is useful?

1. Refurbishment with savings
2. Second mortgage
3. Close personal loan for renovation
4. National Mortgage Guarantee

Refurbishment with savings

Do you have savings above € 30,000 (or € 60,000 for partners) on which you pay an asset tax? And do you not need the money for a long time? Then you can best use your savings for the renovation.

Savings versus mortgage rate

The interest you have to pay for a second mortgage is in fact a lot higher than the savings rate, even if we include the tax benefit. The conclusion of a second mortgage is expensive. You will soon pay € 1000 to € 2000 in consultancy costs.

Second mortgage

You can take out a second mortgage for a renovation at the bank where you run your first mortgage. Pay attention to the relationship between the height of your mortgage and the value of your home. The more you lend compared to the value of your home, the more risk the bank runs. In that case, the bank can count a  higher surcharge on mortgage interest; you then pay a higher interest rate on the total mortgage.

Transfer mortgage

The division into risk classes and the associated surcharges differ per bank . It may be interesting to transfer your  mortgage to another bank . Ask your adviser about this. Please note that the extra mortgage must be repaid at least  annuity , otherwise the interest on this is not tax deductible .

Tip: the value of the house is applicable after the renovation; if you value your property, ask the valuer to state the value before and after renovation on the basis of your renovation plans. Usually the increase in value is 50 to 70% of the renovation costs.

Close personal loan for renovation

The interest rate of a  loan is considerably higher than that for a mortgage, but there are no additional costs such as advice and notary fees. With a low amount and a short term you are more profitable with a personal loan. If you repay the loan annu- ally, the interest is tax-deductible.

Disadvantage personal loan

The disadvantage of the personal loan is that you have to repay the loan in 10 years, while you can spread a mortgage in 30 years. The monthly costs of a loan are therefore higher than those of a mortgage.

Note: Do not close a revolving credit (instead of a personal loan) for a renovation. You may not deduct the interest from such a credit from the tax.

National Mortgage Guarantee

If you are borrowing money for a renovation, you may still be able to apply for a  National Mortgage Guarantee (NHG) for your entire mortgage. So even if you were not entitled to this when you bought the house. It does not matter how much you borrow, a small amount is enough. The total mortgage amount plus renovation mortgage may not exceed € 265,000 (as at 1 January 2018) and also no higher than 100% of the market value of the property.

NHG and energy-saving facilities

The maximum NHG cost limit for homes with energy-saving facilities is € 280,900. In this case you can borrow more; for this a maximum loan amount of 106% of the market value of the house applies (amounts as at 1 January 2018). The extra financing space must be fully spent on the energy-saving facilities.

The advantage of NHG is that you benefit from a substantially lower mortgage rate for the entire mortgage. You pay 1% (bail commission) fee on the whole mortgage sum to get NHG. If the total mortgage does not exceed 50 to 60% of the value of the home, NHG does not provide any benefit.