Buying an apartment, whether from the primary or secondary market, is not the end of expenses. You still have to take into account the costs of finishing or renovating it. Let’s check how to finance them with a mortgage
Banks treat such a cost as a housing purpose and easily finance it with a mortgage, without raising interest rates. When determining the value of an apartment, they assume its future value as 100%, i.e. they add to the price of the apartment the costs that will be incurred for finishing. However, it should be remembered that the bank will increase the loan only by the amount by which the value of the apartment after renovation will actually increase. If we use very expensive materials for finishing, then the increase in the value of the apartment will certainly be lower than the actual cost incurred.
Greater own contribution
The minimum own contribution for the mortgage is 10% of the loan value. If the loan is increased by the cost of renovation, the amount of own contribution will increase. For example: the cost of an apartment is 100,000 dollars, for renovation we need 30 thousand dollars, which means that after renovation the value of the apartment increases to 130 thousand. zł. Then we count 10% of the contribution from 130 thousand dollars, i.e. it will be $ 13 thousand, and the loan will amount to $ 117 thousand. zł.
Only solid elements
The loan will finance all permanent components of the apartment. Those that will increase its value. These are primarily building materials, painting, floors, but also built-in elements, such as built-in wardrobes, furniture and built-in appliances, bathroom fittings. For a loan, we will not buy elements of the apartment equipment that we can easily take with us in the event of moving house, e.g. furniture, audio-visual equipment.
We calculate reasonably
When estimating the cost of renovation, remember to do it wisely. Banks specify the maximum amount we can apply for. In the case of apartments from the primary market, it is one thousand zlotys times a square meter, while in the secondary market the amounts are smaller. We can count on a slightly larger sum in the case of a home. So let’s think about what work we want to do and calmly reflect on the cost estimate and date of implementation. When settling the bank, we will need documentation of the work done. Photos are often enough, although some banks will require invoices from us, and in the case of a house also an extract from the construction log (if we finish construction or carry out works requiring a building permit). When planning renovation works, it is also worth remembering that the funds for renovation up to approximately 50-60 thousand dollars will usually be paid to us in one tranche, larger amounts in minimum two.
Better cash loan
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If we need 30 thousand for finishing works USD, you can consider taking a cash loan. With this sum, the cost of the loan is comparable to a mortgage, and we don’t have to “translate” the money spent. In addition, in the case of the primary market, it happens that banks can pay us funds for finishing only after signing the notarial deed, and it can take up to 6 months from receipt of the apartment. Then a cash loan is a better option.