In this article we explain the benefits and challenges of legalization and why borrowing money for a vacation home is often a better option than a mortgage loan.
Borrow money for recreation home
People who want to buy a holiday home – for holidays, rental or permanent residence – usually have 3 options to pay for such a house:
- From equity
- Take out a mortgage
- Borrow money, such as a Personal Loan
Paying a property from equity is of course the best option, but not everyone has the money for it. A mortgage or a consumer credit are then obvious.
Mortgage loan or borrow money?
The biggest advantage of a mortgage is of course the current extremely low interest rate. But with a mortgage loan you do enter into a financial obligation for 20-25 years.
A mortgage of 100% is usually not possible, at most 60% – 90% of the appraisal value. In addition, there are all kinds of costs associated with taking out a mortgage: notary, appraisal and other buyer costs. In addition, many mortgage lenders often use risk-limiting acceptance criteria and interest surcharges, because in the case of mortgages, the value of the property is taken into account in acceptance and interest.
Those who prefer to borrow money through a personal loan or a combination loan now also pay a historically low and fixed interest rate: starting at 3.9%. The term is a lot shorter than with a mortgage (usually 10 years) and you get the total amount paid into your account in one go. The home is therefore directly from you, without collateral to a mortgage lender.
Personal loans are provided based on the income and expenses of the consumer. So there is no commitment with the financing object (the holiday home), as with a mortgage.
Another big advantage is the possibility of being able to repay additional fine without penalty, as many and as often as you wish. With a mortgage that is only a maximum of 10% – 20% on an annual basis.
With extra repayments you shorten the term of the loan and / or the monthly repayment amount decreases. Whether it is a holiday home for permanent residence, vacations or rental: the faster you pay off, the more you can enjoy your recreational home.