House and apartment owners want to remodel their property from time to time so that it gains in value and the quality of life increases. Heaters are often replaced, the attic expanded or the property provided with thermal insulation. The conversions always cost a lot of money that hardly anyone can afford without outside capital. So many decide to take out a loan to convert. There are a number of things to keep in mind so that the loan is the right amount and the borrower doesn’t pay too much.
What is a loan to convert?
The loan is also known as a modernization loan and is used exclusively for modernization or renovation. The loan is granted up to a total of 50,000 USD. So it is important that the borrower draws up a plan to be able to estimate the cost of the renovation.
The material costs should be listed as well as any working hours. A bank meeting should only be held once an exact sum has been determined. If a loan already exists, you can speak to the bank so that the current loan may be increased. The loan for the renovation is earmarked, so that the loan amount can only be used for the renovation.
Conditions of bank talk
A loan to convert is usually paid out after a few days if the loan has been approved. In addition, the terms of these loans are very flexible. Often the term is at least five years, so that there is enough time to repay the loan amount, especially with large sums. When granting the loan, the bank requests the latest salary slips, proof that the property belongs to the borrower and a credit bureau report. As a rule, banks waive further collateral if the creditworthiness is given.
If the borrower’s income situation changes over the course of the term, the borrower can terminate the loan after six months, which is not possible, for example, with construction finance. In the event of termination, however, the loan amount as a whole must be paid back. However, there is also the option of agreeing special repayments with the bank. In this way, an agreed percentage can be deducted each year. This is particularly advantageous if the term is to be shortened or if there are unexpected incoming payments, such as an inheritance.
Advantages of the loan
Not only the improved quality of living and the increase in value of the property are among the advantages that a loan brings. This also makes it possible to save a lot of money through the conversions. The energy savings are enormous, especially with thermal insulation and new radiators. Over 77 percent of the total energy requirement is spent on heating a property. Appropriate measures can save these costs by three quarters.