Loan or mortgage: What is the best alternative to renovate a home?

Loan or mortgage: What is the best alternative to renovate a home?

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save on the bill, give a fresh air to the home of a lifetime… A reform offers a thousand possibilities to the user, since it allows him to modify a property at will to achieve his goal. However, in order to carry out this project, funding is needed, but… What options exist?

personal savings

The first thing a person can think of is paying for it with their savings, something that, depending on the amount of the work, can be complicated in the short term. After all, if what you want is to reform the insulation of the house or even change it from top to bottom, you will need large amounts of money. That is why it is advisable to consider the issue of financing.


To get the money for the reform there is the loan to use. There are many lenders and even the banks who have this product. In this case, the most important thing will be to compare the terms and interests of each alternative.


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It should also be borne in mind that, if you have a mortgage, you can increase its capital. “Among the citizens there is a great lack of knowledge. People do not think that, for example, they can put the housing reform in the mortgage because they are educated to think that in order to reform they have to save,” he assures Simone Colombelli, director of mortgages at iAhorro.

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mortgage extension

In order to increase the capital of the mortgage, the entity will carry out a study of its client to find out if it will be able to face the increase in the monthly installment. In the event that it rises too high, an extension of the repayment period can also be requested, although, in that case, it would be necessary to see how much the interest on the loan itself increases. Ultimately, the user will have to talk to the bank and reach a consensus.

Commission for novation

When the bank approves the extension of the mortgage, a novation will be carried out. This procedure carries a cost: will have to pay a commission for novation (in the event that the amortization period is modified), notary, registration, agency and appraisal. Therefore, it will be necessary to disburse an amount of money to be able to carry out the extension.

Is it better to opt for a loan or extend the mortgage?

So… Is it better to opt for a loan or extend the mortgage? It will depend on the objective of the reform, its amount and the conditions offered by both routes. For a small project, a loan may be more convenient.because it provides more flexibility in terms of amounts of money and, in this way, an attractive interest can be obtained.

However, if what the user has considered is to perform a major project expanding your mortgage will be more profitable. Mortgages have a lower interest than loans, which will allow the person not to have to disburse more than expected.

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Likewise, having a current mortgage is always more convenient to have one debt than several separate ones, since, as a whole, they end up paying more interest. Wrapping it all up in one can help the homeowner save money.

Exclusive mortgages for reforms

It may happen that the user who wants to reform his home does not have a current mortgage. In that case you can request exclusive financing for a reform.

Santander, for example, has the so-called mortgage for other purposes that can be used for this type of project. Allows you to request up to 60% of the appraised value of a house free of charges with a maximum amortization period of 15 years.

The conditions are more limited than in a normal mortgage, but depending on the amount of the work it can be a viable option. Everything will depend on what is most profitable once all the options have been considered.

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