Is it better for me to extend a mortgage or ask for a personal loan?
Making a small reform at home, changing the kitchen or facing some unexpected expense are situations that many people face and with which a question arises: is it more convenient to extend my mortgage or ask for a personal loan ? When they need financing, they have to think that since they are paying a mortgage every month, the easiest thing is to expand it and thus have only one payment. But be careful, because this thought if done without comparing can lead you to be paying more .
Before extending your mortgage you should know that this operation, which is known by the term of novation, entails expenses that may be higher than the interests of a personal loan. These are the costs that a novation has:
- Commission novation . It is usually negotiated by signing the mortgage conditions before granting. Most commonly, it ranges between 0 and 1% of the capital that remains to be amortized.
- Appraisal. Being a mortgage increase the bank can request a new appraisal of the home, although not in all cases it occurs. Each appraisal agency has its own rates, so it depends on which one you choose.
- Management expenses . For taking care of the necessary formalities before the different institutions an amount is charged that depends on each agency.
- Notary fees. We must make a new visit to the notary to attest to the changes, with the expenses that this entails. It can be between 0.2% and 0.5% of the borrowed capital.
- Property registration. Having to modify the entry of the mortgage that weighs on a property you have to pay for it. It is usually about half of what the notary’s expenses cost.
- Tax on Documented Legal Acts. Payment of this fee depends on the Autonomous Community in which the operation is carried out. It is usually around 0.5% of the amount due.
Although each case is different and there is no single answer as to whether a mortgage extension is better or to request a personal loan, the novation is usually only agreed when the mortgage is in the last years of the mortgage or if the Savings needed to meet expenses.
In addition, it must be taken into account that having signed a mortgage does not mean that the banking entity is willing to extend it, since it may consider that the financial situation of the client is not the most appropriate to assume that cost, so it can be denied. In this case the personal loan is a solution to get the money.
Another factor to study before deciding to extend the mortgage or apply for a personal loan is the amount needed. If it is not very high, credits such as those offered by Currency Now of up to 5,000 euros are an easier, faster solution without so many associated expenses or efforts.