Who owns a property has a consistent value in Germany, which can contribute a large part to the financial security. It does not matter whether your house or apartment, your own living space is a lasting security. If the home has been paid off, only maintenance costs and additional costs remain what the expenses to live are much cheaper than in living space which is inhabited for rent.
Which uses are permitted
Basically, the final decision lies with the bank, which is to grant the loan. We have listed the usual uses here:
- Renovation of sanitary facilities
- Laying new floors
- Inserting new room doors
- Exchange of wallpaper, or painting works
But if you have your own four walls, then you are also in charge of maintenance. If repairs are necessary, extensions are planned or even major renewals become necessary, larger sums can come together. If these can not be financed out of pocket, a renovation loan can be the way to go.
What differentiates the renovation loan from other types of loans and how to find the cheap loan is explained below.
- Save money on the renovation
- Favorable interest rates for the renovation loan: Due to the mandatory earmarking, the interest rates are often better than the installment loan without earmarking
- Acting yourself: If you buy the necessary materials directly at the hardware store, you can reduce the investment. With a smaller amount, the credit is easier to get. As a rule, the craftsman always strikes when it comes to material procurement. Let the craftsman come and get the necessary materials yourself.
- To insure: The artisans who have arrived do not pay in cash and still insist on an invoice. This can be claimed for tax purposes.
How is the renovation loan defined?
A renovation loan is very similar to a conventional installment loan. A certain amount of credit is added to a fixed repayment term at a fixed interest rate. The borrowed amount is repaid monthly over the repayment term. The big difference to the installment loan lies in the intended use. In the installment loan, this is not determined and the borrower can freely dispose of the loan amount.
In the case of the renovation loan, the borrower must also use the loan amount for the specified property and the renovations. How exactly the work is specified in the contract is defined differently from bank to bank.
As a rule, a renovation loan is only taken by owners. Theoretically, the tenant can take a renovation loan for his rental apartment. However, whether a tenant wants to take out a loan to invest in his rental apartment remains questionable.
Often confused with the modernization loan
The modernization loan is similar in purpose to the modernization loan. Both loans are earmarked for a property, but there is a significant difference. The modernization loan must increase the value of the property. For example, the modernization loan could be refurbished with energy.
Modernization by law
A modernization according to § 555b BGB is precisely defined by the legislator, these are structural changes:
- through which final energy is sustainably saved in relation to the leased property (energy modernization),
- sustainably saved by the non-renewable primary energy or the climate is sustainably protected, if there is not already an energetic modernization according to number 1,
- through which water consumption is sustainably reduced,
- through which the use value of the rental object is increased sustainably,
- through which the general living conditions are permanently improved,
- which are carried out on the basis of circumstances for which the lessor is not responsible, and which are not conservation measures under § 555a, or
- through which new housing is created.
The legal text, however, is not binding for banks, but set for landlords. What exactly the bank accepts everything for a modernization loan must be clarified in individual cases.
How can you get favorable interest rates
The interest rates are currently favorable for all types of loans, which is related to the low-interest phase. But if you want to find the cheapest among the already cheap offers, should use our credit comparison. The following factors affect interest rates:
- The loan amount
- Your own credit rating
- Collateral that can be seized in an emergency
- The desired repayment term
The loan amounts for the renovation loan are very flexible. At runtime, anything between 12 and 120 months is possible, with most loans ranging between 24 and 84 months.
The replacement of windows or the front door usually goes hand in hand with an energetic refurbishment and then falls within the scope of a modernization loan. Whether this work can be covered in individual cases but also by the renovation loan is to clarify. Definitely excluded from the renovation loan are investments in the kitchen.