Are the renovation costs higher than the increase in value?
Has the valuation expert determined that your new home will not increase in value by the same amount as you are looking to invest in the renovation (as is often the case)? If so, you will have to pay that section of the costing that will not add to the value, as the lender will only finance work that increases the value of your house. Therefore, make sure you allow for this in your budget!
The full amount that you have budgeted for your renovation is deposited into what is known as a construction deposit (or home improvement account), which contains not only the lender’s contribution, but also your own contribution. The amount is deposited in a blocked account, which is utilised by you to pay all invoices directly related to the renovation. Think of it as a kind of separate mortgage account.
Find out exactly how a construction deposit works.
Are you planning to make your home more sustainable? If so, you will have an added advantage with some lenders.
For energy-saving measures, you are entitled to borrow up to 106% of the property’s value after renovation for instance, instead of the usual 100%. This is also the case for mortgages taken out with the Nationale Hypotheek Garantie (National Mortgage Guarantee). In other words, you can borrow up to 6% over the purchase price for energy-saving renovations, without having to contribute any of your own capital. The precondition for this is that the entire amount must be spent on making your home energy-efficient.