Building renovation without a mortgage: the financing alternatives available

What financial solutions are available for renovating a house?

In many cases, to undertake renovation work, owners require a mortgage loan, a long-term loan which can also have a duration of 35-40 years. However, it is not always necessary to resort to this solution. In fact, there are various options on the market that allow you to obtain liquidity with procedures that are often not complex: examples are building bonuses, personal loans, salary-backed loans, targeted financing and real estate leasing.

Regardless of the solution you intend to choose, it is always advisable to carry out a loan simulation, because you will be able to have a precise picture of the commitment you will be making for a more or less long period. Having said this, let’s analyze the various alternatives to the mortgage.

Building bonuses

Construction bonuses are tax breaks that the State makes available to citizens who carry out renovation work. Examples are the Renovation Bonus and the Ecobonus. These bonuses cannot be considered as direct financing, however they are concessions that reduce the cost of renovation interventions and, consequently, may make it unnecessary to resort to a home loan, the request for which involves rather complex bureaucratic procedures and also considerable costs (in addition to interest expenses, various other expenses must be considered: appraisal, notary, investigation, insurance).

Personal loans

Another option that you can evaluate to cover the costs of a home renovation is a personal loan. This expression usually indicates a non-finalized loan, i.e. not tied to the purchase of a specific asset. The sum that is disbursed by a finance company or a bank can be used to finance housework, reducing the impact of construction costs on liquidity.

Compared to a mortgage, a personal loan involves less bureaucratic burden. The duration is also shorter: in the case of personal loans, in fact, it usually ranges from a minimum of 12 to a maximum of 120 months. It is therefore a very flexible option.

The salary transfer

The salary-backed loan is a particular form of personal loan reserved for employees or pensioners. The name of this loan derives from the fact that the monthly installment cannot exceed one fifth of the net salary or pension. Furthermore, the reimbursement takes place through a deduction from the pay slip (made by the company) or on the pension slip (made by the social security institution); this avoids forgetfulness and delays in payments.
It is a formula in which the installment amount is constant and, as such, makes it easier to plan family expenses. Even in this case, the bureaucratic process for the request is not complex and quite fast.

Finalized financing

Finalized loans, offered by both banks and finance companies, work differently from traditional personal loans. They are in fact linked to the purchase of a specific good or service. Also in this case, the bureaucratic aspect is less burdensome than that of a home loan.

Real estate leasing

Real estate leasing is a less common solution than the forms of financing mentioned previously. It can be considered as a sort of rental contract in which a finance company purchases a property which is then granted to the applicant for use upon payment of a fee. Once the contract is terminated, the applicant can decide to purchase the property by paying the remaining amount or to renounce the purchase.

Real estate leasing is very different from a mortgage. As a rule, when requesting a mortgage you can obtain a maximum of 80% of the value of the property; it will therefore be necessary to have the remaining amount to then finalize the purchase. In the case of real estate leasing, you have coverage up to 100% of the value of the property. Mortgage payments are usually lower than those of a real estate lease, but the duration of the latter is shorter. Finally, the tax breaks for real estate leasing are usually very favorable.