It is not cheap to improve private housing, so a loan for home improvement projects’ loans become the only option for financing such an event. Unfortunately, today in most banks it is impossible to find a targeted lending program that is aimed solely at redevelopment or reconstruction of a residential building.
In most cases, the bank offers to issue a personal loan, which implies a high interest rate and an amount that is clearly not enough for a normal reequipment or extension of individual premises. It will be possible to take out a loan for the reconstruction of a house if we describe it as a loan to improve housing state. Most of the preferential programs are aimed at buying an apartment – such a scheme has long been worked out by banking organizations and provides them with profit with minimal risks. Nevertheless, banks issue money for the reconstruction of a private house, which, from a legal point of view, is also an improvement in living conditions, since it will allow the owner to expand the area of useful or living space.
The terms for issuing a cash loan for housing restructuring will vary depending on the chosen credit institution. But after analyzing the popular offers, one can single out the requirements that combine similar targeted loans:
- credit history – people with good credit history can apply for a loan. Recorded delays or bad loans in the past are likely to be the reason for refusal, because in the case of directed lending, the risk for the bank will exceed the possible profit;
- right of ownership – in order to receive a loan for home improvement, it is necessary that the entire residential building be owned by the borrower. Simply put, if a residential building is divided into 2 families, then it will be easier to try to take out a consumer loan, since it will be more difficult to get money to rebuild part of the real estate;
- life insurance – it is possible to take out a loan for the home improvement in a rural area only if the borrower’s real estate and life are insured, because otherwise the bank will issue a minimum amount at a high interest rate. And if the borrower insures himself and the building, then the lending terms will be milder, because the bank will be sure that it will return its money even in the event of an accident.
- proof of income – the bank will issue money for the construction of additional premises or redevelopment of a home only to those who officially confirm a stable income;
- subject of collateral – a large loan amount can be issued only upon provision of a liquid collateral. Given that the building to be reconstructed usually has low liquidity, the lender may ask to provide another object of collateral, and if it issues a loan secured by the house, the amount is unlikely to exceed 50% of the market value;
To find a banking organization willing to lend money to improve living conditions, that is, to renovate a house, you should contact a loan broker. A large number of refusals recorded in the credit history will reduce the possibility of a positive decision by the bank commission to virtually zero.
Benefits of a home improvement projects
A home improvement projects’ loan differs from an inappropriate consumer loan by more favorable lending terms. That is why, even with all the necessary documents, a person may not receive the money he needs, and a bank employee will try to persuade a distressed consumer to get a regular loan. Distinctive features of a targeted loan for improvement of living conditions are:
- low interest rates – the annual overpayment on the reconstruction loan will fluctuate between 10-13%. Whereas with a regular consumer loan, interest rates start at 15-18% annually;
- long term lending – a loan for the reconstruction of a residential building is issued for a period of 3 to 30 years. During this period, the borrower must reconstruct the house and repay the debt. By the way, the lender can control the direction of the use of the issued funds;
- large amounts – targeted lending to improve living conditions usually starts from several thousand dollars. For individual borrowers who have provided liquid collateral and have a good credit score, the amount can be increased;
- a credit vacation option – usually the duration and terms of a credit vacation are written down in the agreement, so it is important to carefully read all the clauses of the agreement so that in the future you do not find yourself in a difficult situation when the grace period will be minimal.
Having decided to take out a home improvement loan, first of all, it is worth contacting a credit broker who, having assessed your needs, will be able to find a credit organization with the most suitable terms for targeted loans. Attempts to independently get through to the money through the credit commission can lead to incomplete implementation of the planned restructuring of a residential building. That is, the money offered by the bank may simply not be enough for a full-fledged reconstruction.