How to pay for a renovation
Monday 27 June 2022
Suppose you want to finance a major renovation of your home: how do you do that? You probably already have a mortgage to finance your home. You can also take out a second mortgage for a major renovation. What exactly is a second mortgage and why you should do that, we explain to you in this article.
What is a second mortgage?
Imagine: you have taken out a mortgage to buy your house. It may be that the current market value of your home is higher than your mortgage amount. This means that you have excess value on your house. You can then take out a second mortgage, as you have financial scope through this surplus value. A second mortgage is then the possibility to make extra money available.
Why take out a second mortgage?
A second mortgage is often taken out to finance a renovation of your home. Think of a new kitchen, bathroom, home improvement or an extra dormer window or insulation. In addition, a second mortgage can also be taken out for other expenses, such as a car or a holiday home. You can even use it to pay off a personal loan.
What are the conditions for a second mortgage?
You should not just take out an extra mortgage: there are always fiscal and financial aspects to it. As with your first mortgage, there are also specific conditions for a second mortgage for a renovation or other expenditure. For example, your income must be high enough to cover the extra mortgage costs and the surplus value of your home must also be sufficient. Not every mortgage lender will allow you to take out a second mortgage for 100% of your surplus value.
How can you calculate a second mortgage? And what about the costs? For this, it is wise to go to a mortgage lender and get advice on what your possible second mortgage entails and what costs are involved.