Home renovations: personal loan or mortgage extension?

If you are thinking of making a makeover in your home and need extra money to carry it out, you should know that personal loans can help you. If it turns out that you are still paying a mortgage for the property, you can also take advantage and request an extension of your mortgage loan and pay the reform.

The HelpMyCash financial comparator shows you which option is more profitable.


Apply for a personal loan

Apply for a personal loan

Personal loans currently have much higher interest than those applied in any mortgage. It is difficult to sign a consumer loan with interest of less than 6%, while mortgages nowadays offer interest at Euribor + 1% at variable rate and below 3% at fixed rate.

In this sense, returning a personal loan will have a higher cost than requesting a capital increase of the mortgage loan. Also, keep in mind that the bank may require you to sign some type of linked product to grant you the personal loan.


Apply for a mortgage extension

Apply for a mortgage extension

Although the interest on mortgages is lower, increasing capital entails making a mortgage novation, and this translates into management expenses:

  • Commission for novation: if it is included in the contract, it may be up to 2%, although it is usual to be between 0% and 1%.
  • Agency: usually not more than $ 150.
  • Valuation: approximately $ 300.
  • Notary: between 0.2% and 0.5% of outstanding capital.
  • Land Registry: approximately half of the notary expenses.
  • IAJD: the capital increase entails paying this tax, which varies according to each autonomous community. The average is 0.5%.

The average cost is usually around $ 1,500, which should be added to the cost generated by the interest on the extended capital.


When do you need to apply for a personal loan?

personal loan?

The option to apply for a consumer loan is more advisable when you need a small amount and you can sign a personal loan without bonding. Also when the bank does not grant you the option to increase the capital of the mortgage or you do not have enough savings to meet the costs of novation.


When is a mortgage capital increase convenient?

mortgage capital increase convenient?

Currently, it depends on each situation. For example, it is more advantageous to increase the capital if you have a few years left to finish repaying the mortgage loan, or if you have the necessary savings to cover the expenses of the extension, and if your bank grants you the novation of the mortgage.

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