There are several ways to finance the renovation of an apartment. A mortgage loan, cash loan or renovation and housing loan can be helpful if we want to buy a flat and bring it to the condition we want.

Renovation of an apartment is a serious expense, often significantly exceeding the possibilities of a household budget. Usually, we take such an undertaking once every few or several years, and the scope of work should be planned so as not to soon have to deal with the mess accompanying modifications and improvements in our four corners.

Before you decide on one of the financing options for the project, you must carefully prepare the schedule and the cost estimate of the work needed. The cost estimation will allow us to answer the question which of the loan types will be the best in our situation. There are several options – from a credit card to a mortgage.

Minor corrections – a cash loan or card will be useful

Minor corrections - a cash loan or card will be useful

Renovation does not have to mean that the whole apartment falls over. Often, it is only about modernizing the kitchen equipment or refreshing several rooms. In this case, the budget may amount to several thousand zlotys or over.

With small renovations, the best form of financing will be a loan related to a small scope of formalities and allowing any spending. Banks offer several such products – credit cards, credit lines in ROR and cash loans. The first two are worth recommending to people who do not want to be bound by a fixed repayment schedule. The line and the card allow you to pay back the debt in any “portions” – any impact on your personal account or card account reduces the limit used.

The cash loan in terms of costs usually does not differ significantly from a credit card or credit line in the current account. The process of applying for funding is also relatively simple, and in the case of a bank with which we already have a relationship (we run a personal account there), it often proceeds on the basis of a simplified procedure that requires fewer documents.

The advantage of a cash loan is the possibility of spreading the repayment over a longer period (up to several years) and a high upper limit of liability. A disadvantage, for those who value flexibility in financial planning, can be considered the existence of a pre-imposed repayment plan. Many banks, however, allow credit holidays during the payment of liabilities, i.e. the possibility of withholding payment of installments. It is also worth remembering that we can always pay our debts ahead of time and thus reduce the cost of borrowed money.

Big renovation – a task for a mortgage or loan

Big renovation - a task for a mortgage or loan

With major investments, renovation costs may reach several dozen or even several hundred thousand zlotys. In this case, the best option would be a liability secured by a mortgage on the property. It will be much cheaper than a cash loan and other products that do not require additional collateral, but at the same time you need to be prepared for a much longer and more complicated application procedure.

A residential mortgage is usually associated with financing the purchase of real estate. However, it may also have another purpose – reconstruction of the premises or renovation. The basic condition for obtaining financing is the possession of real estate on which the bank can secure itself with a free mortgage.

The advantage of a mortgage is a low interest rate – for major renovations it will be the cheapest option to borrow the funds you need. However, this product also has several important limitations:

  • the minimum amount is usually several tens of thousands of zlotys,
  • the bank will require documentation of expenses incurred for renovation,
  • the lender expects us to have own contribution,
  • the loan application procedure requires, among others Property valuation – it is long-term and involves additional costs.

If we buy a property and we want to renovate it right away, a housing loan can combine several purposes. Most banks allow a two-in-one approach, but keep in mind that when setting the maximum amount available to a customer, lenders use different approaches and requirements for the payment of a newly-bought flat owner.

A mortgage also requires you to have property that will be accepted by the bank as collateral. Like a mortgage, it will have to go through quite complicated formalities. In this case, however, the bank does not verify the purpose of the funds – we can spend them in any way, without the need to present, for example, invoices for materials and construction works. The disadvantage of this form of financing, however, is the slightly higher cost – usually exceeding the price of a home loan by several percentage points.