Are you thinking of buying a home and renovating? Or perhaps you already own a property that needs renovation? In both cases, it's essential to understand how to get a mortgage to finance those renovations. In this article, we'll break down the key aspects you need to consider.

How to Get a Mortgage to Renovate Your Home Ownership

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When you want to finance your home renovation, you should consider the following:

1. Free of encumbrances: Your home must be free of previous mortgages.

2. Financing Percentage: Generally, you can request between 50% and 60% of the appraised value of the property.

3. Repayment Term: The term is usually about 20 years, with interest rates in excess of 3%.

4. Budget and Permits: It is necessary to present a detailed budget of the reform and make sure to obtain the necessary permits and licenses.

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Including Mortgage Reform when Buying a Home

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If you are buying a second-hand home that needs a complete renovation, here are some tips:

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How to Get a Mortgage that Includes Reform:

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1. Usual requirements: You must meet the usual requirements, such as sufficient income, good credit history and previous savings.

2. Percentage of Financing: The entity can lend you up to 80% of the appraisal or purchase value of the property. The amount destined to the reform is generally limited to 30% of the total loan.

3. Budget and Appraisals: You will need to submit a detailed budget for the renovation and submit to additional appraisals to verify the progress of the work.

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Advantages and Disadvantages of a Refurbishment Mortgage

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Advantages:

- Single Payment: You will have a single loan with a single installment and interest, generally lower than a personal loan.

- Interest During the Reform: You can pay interest only for the duration of the works, which reduces your financial burden.

- Energy Efficiency Improvement: Get better conditions if the renovation improves the energy efficiency of the house.

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Disadvantages:

- Additional Expenses: You will have to assume the appraisal expenses and taxes associated with the mortgage loan.

- Extended Repayment Period: You will lengthen the repayment period and the total amount to be repaid, which may increase the risk of over-indebtedness.

- Variety of Conditions: Conditions vary between entities, so comparing mortgages is essential.

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Alternatives to Obtain Financing for Reforms

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If you can't get a mortgage to renovate your home, consider the following options:

- Personal Loan: Although more expensive due to higher interest rates, a personal loan is an alternative if you are unable to obtain a mortgage.

- Mortgage Extension: Once you purchase the property, you can apply for a mortgage extension to finance the renovation. This uses the terms of your original mortgage.

- Mortgage Broker: Hiring a professional intermediary can help you find the best mortgage and negotiate favorable terms with the bank.

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In summary, financing a renovation through a mortgage is an option to consider, but it is crucial to carefully analyze the advantages and disadvantages and compare the available offers before making a decision. If you cannot get a mortgage, there are alternatives such as personal loans or mortgage extensions to finance your renovation projects.

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