What types of work can be included in a mortgage loan?


Currently, many French individuals opt for purchasing an old property. This subsequently involves carrying out renovation works to modernize the property and comply with current recommendations. This could include electrical work, energy-saving measures, double glazing, etc. Consequently, the bill can increase rapidly depending on the nature of the works required. On one hand, materials can be expensive. On the other hand, the quote can significantly rise with labor costs if you hire artisans. Besides state aid, a mortgage loan can finance the complete renovation of your real estate property. However, to obtain the mortgage loan, these works must amount to more than 75,000 euros. By subscribing to this loan, the borrower can also benefit from a lower interest rate than a standard consumer loan.

Home Renovation Works

While a consumer loan can finance the purchase of any property, a mortgage loan concerns the acquisition or complete rehabilitation of a property. This type of loan can include the purchase of construction materials and payment for the services of artisans carrying out the works.

Technical Expertise of the House

A portion of your mortgage loan can finance the technical expertise of the house. It is indeed important to diagnose the habitat to determine the necessary works. To avoid unpleasant surprises, it is preferable to carefully carry out this activity before purchase while using the services of a building engineer. Equipped with an evaluation grid, the specialist visits the site to identify the causes of a disorder, defect, non-compliance, or even a disaster. Thus, they can propose principle repair solutions.

The prices of services provided by a building expert vary depending on the surface area and condition of the premises to be assessed. They also depend on the nature of the problems and the skills required. However, a quality expertise firm will charge you between €1,000 and €2,000 for the operation. To better compare prices, it is advisable to obtain several quotes. Often, a low price does not guarantee quality. Conversely, you should also be wary of a cost that is too high. Therefore, you should inquire without hesitation about the experience and guarantee offered by the professional.

Cleaning and Demolition Works

Sometimes, it is necessary or interesting to demolish a dilapidated house. Legally and technically, embarking on this activity alone can indeed be difficult. Poorly executed demolition can even be dangerous. With a portion of the sum borrowed from the bank, you can entrust the work to experts in the field. Seeking the assistance of these professionals is a guarantee of safety and is mandatory in certain cases. The cost of demolishing an average-sized dwelling ranges from 7,500 to 25,000 euros.

The price varies depending on the complexity of different tasks related to the operation, the prices set by the company, and the location of the property. The cost of building works is indeed higher in large cities. For total demolition works, the applicable VAT (Value Added Tax) remains at the normal rate of 20%. If it is a partial demolition required for the completion of renovation works, an intermediate VAT rate of 10% may apply. The intervention of a professional team is therefore mandatory for the entire deconstruction and reconstruction operation.

Energy Renovation Works

With a mortgage, you can improve the thermal and energy performance of your home while effectively reducing your heating bills. Moreover, this project helps to emit less carbon dioxide and thus minimize your carbon footprint. Being both an ecological and economical gesture, this operation generally includes 4 types of works, namely :

  • Insulation,
  • Heating,
  • Heating regulation,
  • Ventilation

To enjoy a good return on investment and a reduction in your energy bills, insulation is the first type of work to prioritize. It effectively allows you to heat your home less.

Additionally, these works help to strengthen the thermal envelope of your house and limit heat loss. With the borrowed capital, several parts of your home can undergo insulation works. It is possible to insulate the roof, the attic, walls, windows, and the floor. Moreover, taking out a mortgage for energy-saving works allows you to carry out the works immediately. To determine which areas to prioritize (roof, walls, floor, etc.), it is recommended to conduct a thermal audit beforehand.

To obtain the desired amount of capital for the energy renovation of your property, you must first simulate your debt ratio. This notion used by the bank precisely determines whether you are able to take out a loan. The debt ratio corresponds to the ratio between your monthly income and your monthly financial charges. Note that these incomes must cover the monthly installments of a loan taken out. Thus, if the financial charges outweigh the monthly incomes, you may risk being unable to repay your installments.

Electrical Connection Works

Like other forms of financing for real estate, especially personal loans, a mortgage can include electrical connections. Following the acquisition of an old property, you must consider certain formalities, especially for safety reasons. Before acquiring the property, you will need to check the condition of its electrical installation. This concerns the connection to

  • water,
  • electricity,
  • gas.

A mortgage enables you to finance your project and seek the assistance of a company specialized in managing the electrical network.

Additionally, you should refer to the electrical diagnosis of the property. This is a mandatory document when selling a property over 15 years old. Since 2018, all properties are subject to this obligation, and the diagnosis must be included with the sales agreement. This document should specifically highlight the condition of the electrical installation. If it does not meet current safety standards, the buyer must consider carrying out rehabilitation works well before requesting the connection. The cost of an electrical connection varies from €1,600 to €2,500 depending on the scope of the required works. Several companies now offer online services to easily simulate installation costs.

You're just a few clicks away from renovating your home.

Interior Finishing and Renovation Works

A mortgage can also include finishing and interior renovation works when your property is nearly complete. This involves paying attention to decoration and layout through :

  • Ceiling or roofing renovation ;
  • Floor renovation ;
  • Floor and wall coverings ;
  • Installation of lighting fixtures ;
  • Painting works.

To optimize the decoration of your property, it is recommended to enlist the services of an interior decorator.

Finishing and interior renovation works require the preparation of a significant budget. On average, you should budget around €150,000. To secure a more substantial amount of money, you also have the option of opting for a loan consolidation. Also known as loan consolidation, loan consolidation involves merging several loans (personal loan, consumer credit, mortgage, etc.). Through this option, you can benefit from lower monthly installments. In addition to a real reduction in your monthly payments, loan consolidation also reduces the cost of insurance. By consolidating all your loans, you will only have to pay for a single loan insurance.

Construction of an Annex

For a large-scale extension to be carried out in an old property, you also have the option of a mortgage. Indeed, the latter allows you to borrow a larger sum of money, and at a more favorable interest rate. Mortgage interest rates are naturally lower than consumer loans. The minimum amount for this bank loan is €75,000, and repayment can be made over a period ranging from 7 years to 35 years by requesting a mortgage loan.

However, it is necessary to provide documents justifying the borrowed amount intended for the works. In general, the sums are not paid into the borrower's account but to the professionals carrying out the works. The bank will also require collateral in the form of a guarantee or mortgage on the property concerned or another available property. Consequently, this guarantee increases the total cost of the loan. The conditions for a mortgage loan intended for financing works are stricter than for a classic construction loan, based on consumer credit.

The works must be directly related to the property. These are major projects that must be carried out by building professionals, and the funds will be directly disbursed by the bank. In this regard, the borrower must provide evidence, which may be a quote or a purchase order. Regarding loan rates, they depend on the economic situation but also on the conditions of the banks. Mortgage interest rates are freely set by the bank. They can be either fixed-rate or variable-rate. Moreover, the bank will provide you with the mortgage rate schedules each month, thus giving you an overall view of the interest rates practiced.

Three criteria can determine the repayment period of a mortgage :

  • The amount of the borrowed capital ;
  • Your ability to repay the loan ;
  • The interest demanded by the borrower ;

The repayment period of a €200,000 loan (3% interest) will be longer than that of a €100,000 loan.

In case the funds have been blocked by the lender at the request of the notary, you repay the loan every month. The monthly payment includes :

  • Amortization of the borrowed capital from the lending institution ;
  • The amount of interest calculated on the outstanding capital at the interest rate agreed upon at the time of subscription ;
  • The premium for your loan insurance taken out at the bank.

It should be noted that each loan repayment installment is automatically debited from your bank account.

Mathieu Amara

Mathieu Amara

Graduated in political science, I have always been passionate about renovation and construction work.

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