But when is it convenient to choose one or the other type of financing and how to avoid paying more than necessary? Here are ten tips. 

  • A personal loan can be cheaper than the mortgage, if the loan you want to apply is limited. If it is high, perhaps it would be better to use a mortgage. In any case, this second type of financing is granted starting from 30 thousand euros. 
  • Eye to Taeg (Annual Effective Global Rate). For personal loans, depending on the amount and duration, the best offers range between 5.44% and 7.98%. For a mutual home renovation the Taeg at a variable rate is between 0.78% and 0.83%. The one for those who opt for the fixed rate is between 1.50 and 2.08%. 
  • Also look at the other expenses. For the personal loan in general there are: the cost of investigation, collection and management of installments, notification and practical closure, stamp duty, and any initial or insurance costs. For the loan, on the other hand, in addition we must consider: the expert (between 200 and 300 euros), the notary’s deed (the cost is linked to the value of the mortgage registration). Again, the costs of the outbreak and fire insurance are mandatory for obtaining a mortgage.  
  • Guarantees are then required for both loans. The applicant must have a fixed income of an amount sufficient to support the installments. Furthermore, for the mortgage restructuring it is also necessary to register the mortgage on the building to be restored.
  • A strength of personal loans is the rapid delivery times, which vary between 24 hours and 15 days. The mutual restructuring, instead, follows the normal procedure of a mortgage for the house purchase. Only to go from the preliminary investigation to the provision, it takes, on average, 60 days.
  • Another difference between mortgage and loan restructuring is represented by the method of disbursement. With the loan the sum is always granted in a single payment. For the loan, if the amount is high, a so-called Sal (Work Progress Status) loan may be required, which provides for the disbursement of the amount in different tranches.
  • The personal loan has a maximum duration of 10 years. The mortgage can reach up to 30-35 years. The longer the loan, the higher the interest rate applied.
  • In terms of tax benefits, the first home restructuring mortgage is a winner: if required for the main residence, it gives the right to an Irpef annual deduction of 19% of the interest paid on the mortgage. The personal loan, on the other hand, does not entitle to any deduction. For the owner, the possibility of enjoying the tax deductions linked to the restructuring intervention remains valid. 
  • If there is already a mortgage loan on the house to be renovated, there are two alternatives: the bank could propose replacing the existing loan with a mutual replacement with liquidity for restructuring. The second solution is a personal loan that does not require collateral to be granted.
  • For both loans the debtor can decide to extinguish the debt, in whole or in part, before its expiry. As of February 2007, due to the first home mortgage restructuring, the bank cannot apply any penalty for early termination. In the case of personal loans, instead, be careful because depending on the contract, a compensation could be provided, between 0.5% and 1% of the loan value.

Leave a Reply

Your email address will not be published. Required fields are marked *