If the construction of a house is an exceptional and unique project, you must know that this great adventure can become a nightmare, especially if the mortgage subscribed to finance the operation does not cover some work. However, what if the loan is insufficient?
Individual house construction: the credit must cover all the works
Address a builder to build his house, ask a master who will take care of everything to do or build his own home by being assisted by a particular craftsman (plumbing, electricity, masonry …), several solutions are available to households wishing to embark on a house construction project.
Also Check: construction to permanent loan
For financing, the classic solution is the bank loan. This is a real estate loan taken out with a bank. His monthly payments are based on the subscriber’s debt ratio (the 33% income rule is often respected), but its amount depends on several financial possibilities such as personal contribution, the share of the loans assisted, the repayment period. .
However, whatever the solution chosen for its construction project and whatever the financial possibilities (personal contribution, loan with zero rate, loan action housing …), the total amount of the mortgage must imperatively cover all the works (foundations to laying tiles) at the time of the loan agreement.
For this, the banks require several supporting documents such as the contract of construction of individual house (CCMI) if the head of work opts for a builder (company or craftsman), the detailed estimates of all stages of the operation if the head of work decides to build his house himself or if he solicits a client.
Other fees may arrive after obtaining the mortgage
Every year in France, thousands of homes build their dream home through developers, builders or specialized craftsmen. The steps to follow are almost the same for everyone: purchase of a building site, the realization of the plan, the obtaining of building permits, the obtaining of the financing, the beginning of the works and finally the delivery of the keys.
For this, a provisional financing plan is put in place. A progressive release of the funds is also set up according to the financing plan defined by the lender, the builder and the project manager. However, despite the subscription of various guarantees and insurances (damage insurance, price guarantee and delivery times …), sometimes the total cost of the operation is greater than the total amount of the mortgage obtained to finance the construction. .
In other words, unforeseen events such as: the modification of a plan or building permit, the addition of options (specific tiles, modern carpentry, high-end sanitary …), exterior landscaping …, can be added to works and increase the total cost of the project compared to the initial financing plan.
Funding for this additional work may result in a lack of funds to complete all work. The initial loan may also be insufficient for those who go into debt to buy a property (house or apartment) unfinished or to finish oneself by playing the handyman (plumbing, electricity, connection …).
House building: what solution if the initial loan is insufficient?
To know that it is extremely difficult, if not impossible to make an amendment to an offer of credit to obtain additional funds, in particular in the context of a house construction project where the release is progressive and according to the progress of the site. In case of lack of funds to complete some unexpected work, the site can be stopped, even if all the funds are not released.
To avoid this catastrophic situation, the future owner can resort to work loans, consumer loans or even cash reserves. This practice can be particularly dangerous since it can increase the owner’s debt ratio and impact its financial equilibrium.
In addition, the future owner may use loan consolidation if he has other outstanding credits. For this, he can make a withdrawal of the balance for the unblocked funds and use the regrouping of all his loans in progress. As part of this banking operation, he can request the financing of new projects to prepay the funds already released and allow to complete the construction. With this loan consolidation operation, the project manager can collect all its loans in one or even obtain a monthly payment adapted to its actual repayment capacity.