What to Do... The House Has Problems!? Want to Borrow Money to Repair the House... What Should You Know?
Important Things to Know Before Borrowing Money for Home Repairs: Want to know what type of house should be borrowed for repairs or what important steps are involved in borrowing money for home repairs? Let's explore the essential information together before borrowing money for home repairs.
Houses inevitably deteriorate over time, especially older homes that have weathered many storms and sunlight. Extra caution is needed as they may develop leaks and cracks more easily than new homes. If you've never borrowed money for home repairs before, you might wonder if you can borrow money for repairs or what the process entails. The magazine 'Baan and Suan' is here to provide you with the necessary information before borrowing money for home repairs.
Recently, our beloved home has faced heavy rains and winds. Some roofs may have cracked and need several sheets replaced, while others may have leaks in the ceilings, or some may require an extension of the kitchen at the back of the house. Regardless, repairing or extending a home can be quite costly. This edition aims to introduce you to what you should know before considering borrowing money for repairs or extensions.
What Type of House Should You Borrow for Repairs?
Borrowing money that requires long-term repayment affects your credit, just like paying off a house or a car. If you need to borrow money for investment or to buy another house in the future, it may also affect the bank's consideration. Therefore, you should think carefully about how necessary it is to borrow money for your home. If you want to repair parts that are not too extensive, such as fixing cracks, repainting walls, or changing bathroom tiles, you might consider saving money to repair them gradually instead. However, if it's a major repair or you want to renovate the entire house, which requires significant expenses, it's better to borrow to reduce the repayment burden. You should list all the items that need repair to estimate the costs and apply for the loan all at once to minimize the impact on your living situation.
What Type of Loan is Best?
The popular loans for home repairs, extensions, and renovations come in two types: long-term loan (Loan) and overdraft loan (O/D). A long-term loan is similar to borrowing money to buy a house, but the repayment period is shorter, about 5-15 years, and there are restrictions on using the funds as specified in the contract. This method is suitable for repairs, renovations, or extensions that require relatively high costs and longer repayment periods, and it also offers lower interest rates. On the other hand, an overdraft loan allows you to withdraw money or issue checks even when your account balance is low. Interest is calculated based on the amount used over time. The advantage is that you can spend the money on anything, making it more flexible. This method is suitable for repairing the house in parts, including decorating and purchasing furniture.
How Much Income Do You Need to Borrow?
Each bank sets different borrower qualifications based on the ability to repay the debt. Borrowers must be between 20-60 years old, and the total loan period combined with the borrower's age must not exceed 65-70 years or according to the retirement age of government agencies, which is the age at which borrowers can still make repayments while employed. If you are an employee of a company, a civil servant, or a state enterprise, you must have a base salary of at least 15,000 baht, and if you are self-employed, you should have an income of around 20,000 baht per month. Additionally, you must have been working or running a business for a certain period, which varies by bank, such as having worked at a company for 4 months or having been self-employed for 2 years to verify the borrower's stability.
Documents and Evidence Required for Borrowing
Applying for a loan requires a considerable amount of documentation to verify the borrower's history and ability to repay the debt, as well as the value of the assets used as collateral to determine the loan amount. Each person may receive different amounts or may not qualify at all. If borrowing alone, the amount may be limited, so having a co-borrower, typically a family member, is often necessary. The required documents include:
Personal information documents such as a copy of your ID card or civil servant card, a copy of your house registration, a copy of your marriage certificate, income verification documents such as a salary certificate, pay slips, bank statements for the past 6 months, professional license documents, and collateral documents such as a copy of the land title deed, construction plans, material lists, construction contracts, and building permits.
Things to Know Before Borrowing
When applying for a loan, the bank will send someone to assess the property you will use as collateral. The maximum loan amount will be 70-80%. It is common for the appraised value to be lower than the actual amount needed. To ensure a good market value assessment, the house or property should be in good condition and fully furnished to avoid significant drops in market price. Additionally, when borrowing money for home repairs, you should have another savings fund to cover the shortfall from the bank loan, as there are other fees involved, such as property appraisal fees, loan application fees, mortgage registration fees, insurance fees, loan closing fees, and power of attorney fees. When combined, these expenses can be quite substantial, so it's advisable to set aside funds for these costs as well, as they are also considered by the bank when assessing your repayment ability.
Thanks to the information and images from Baan and Suan Magazine, September 2016
