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A cash loan for renovation or a mortgage?

With the arrival of spring, national banks are recording increased interest in loans and borrowings that can be used to finance the renovation of an apartment or house.

It is worth knowing that people who need money for such an investment have at least two options to choose from.

The first is a traditional cash loan with no additional collateral. Currently, such loans may have a value of up to USD 150,000 – USD 200,000. A loan secured by a mortgage is another solution. Such a loan with collateral in the form of a house or flat may have a smaller installment than a cash loan.

However, you have to realize that the granting of a mortgage requires additional formalities, and the product itself is more complicated than “cash”.

In cash loans, you can sometimes get a fixed installment guarantee

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People looking for a cash loan have a simplified task since the Forsyte family portal regularly publishes the “cash” rankings with the lowest installments.

As part of the analysis regarding the renovation of a sample apartment (value: USD 250,000), we took into account a larger amount of cash loan than usual (USD 50,000). According to the assumptions, this amount will be repaid for eight consecutive years.

After analyzing the market offer, it turned out that the lowest level of installments can be proposed by (respectively: USD 722, USD 751 and USD 758). The offer of the last of the analyzed banks deserves special attention due to constant interest rates.

Such a solution guarantees a fixed installment, even when the GFI interest rates increase significantly. Being able to secure a fixed installment is an advantage of cash loans over mortgage loans. These loans always have a variable interest rate, which is set as the sum of the reference rate (e.g. GFIC 3M) and a fixed margin.

Those interested in a larger cash loan, in addition to the proposals in the table below, should also take into account from GFI. The loan has a fixed interest rate even for large amounts (up to USD 120,000). Like the three loans described below, Fast Loan is not affiliated with compulsory life insurance.

The cheapest cash loans for renovation (USD 50,000 for 8 years)

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Cooperative – loan amount from USD 500 to USD 200,000. Repayment period from 3 months to 120 months.
In the case of a repayment period not exceeding 36 months, a fixed interest rate applies. Loan insurance is not compulsory. It is possible to submit an application with three co-borrowers. The Bank guarantees the lowest installment.

Honest bank – loan amount from USD 1,000 to USD 160,000. Repayment period from 3 months to 96 months.
In the case of a repayment period not exceeding 36 months, a fixed interest rate applies. The Safe Loan insurance package is not mandatory. Its monthly cost is 0.28% of the loan.

Good Finance – a loan with a fixed interest rate. Loan amount from USD 500 to USD 120,000. Loan period up to 108 months.
The Cheap Loan with an Account is intended for customers who transfer their remuneration or retirement or disability pension benefits to ROR maintained at Good Finance. Credit insurance is voluntary. It is possible to suspend the loan repayment (once a year, fee USD 9.50).

A cash loan can be “cheaper” and much more onerous

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After analyzing the most attractive cash loans for apartment refurbishment, it is worth checking what financing methods (USD 50,000) banks offer as part of mortgage loans. The table below presents three loans repaid over 8 years in equal installments.

The analyzed loans are characterized by the lowest level of monthly installment on the market and are also available for relatively small amounts.

The latter issue deserves attention, as some banks do not borrow USD 50,000 with mortgage collateral. An example is Good Finance, in which the value of mortgage loans starts from USD 70,000.

Three “cheapest” mortgage loans may seem attractive

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The installment value of the three “cheapest” mortgage loans may seem attractive against the background of similar amounts for cash loans. In this context, however, there are a few things to keep in mind. First of all, we won’t find a mortgage on the market with a fixed installment guarantee.

You also have to remember that cash loans are often offered with many other products that increase total costs. Examples include life insurance, property insurance or bridge insurance. The total cost of taking out a mortgage, increasing the fee for real estate valuation and entry to the mortgage.

The sum of these fees may range from 500 USD to 1000 USD. People who take out a mortgage must realize that the whole procedure will be just as long as for a home loan.

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