Homeowners don’t pay rent, but they have to take care of the maintenance and renovation of their property. That goes into the money. In fact, when major repairs are required, it gets really expensive. By the energy saving ordinance Owners are obliged to retrofit their house so that it complies with the new regulations. Failure to comply may result in fines. The retrofitting obligation includes, among other things, proper thermal insulation, energy-saving hot water preparation and the renovation of the heating.
At the same time, the home should not only be technically state-of-the-art, but also be a place of well-being and relaxation. That works when there is renovation. So that the money does not run out during the renovation work, homeowners should set the financial framework in advance and finance the renovation with a loan.
Home loan for financing?
German financial institutions provided one trillion euros for home loans last year. More and more banks are offering such a loan to help homeowners finance renovations. The loans have a flexible term and the interest rate is independent of the income of the owners. As a rule, amounts between 5,000 and 70,000 euros can be financed with a home loan. The payment date can be freely selected within a three-month time frame. Many banks allow early special repayment or full repayment without incurring additional costs.
Homeowners should know that the home loans are earmarked and can only be used for renovation, renovation and expansion work, as well as furnishing purposes. The housing loan is, so to speak, an installment loan with a purpose limitation.
For whom is the home loan suitable??
Modernizing the kitchen, bathroom and living room costs money. A home loan makes it easier to finance the renovation. This start-up financing is cheap. Interest rates are currently low. The effective interest rate for home loans is less than four percent.
The credit terms depend on the respective bank. Some banks grant home loans to freelancers and self-employed, others require permanent or salaried employment that is guaranteed during the loan term. Furthermore, all banks require proof of home ownership by means of an extract from the land register or tax assessment. Some financial institutions require net income to exceed a certain amount per month.
Owners who are interested in a home loan should get one in advance Comparison on the Internet to find the best deal. The comparison can save you a lot of money. Because some financial institutions charge double the interest, while other banks have cheap interest rates. In individual cases, homeowners can save hundreds to thousands of euros in interest.
Alternative mortgage loan
Owning a home is a form of security for the bank. With a mortgage loan, she pays a favorable effective interest rate, which is usually lower than the interest rate on an installment or housing loan. A mortgage loan can be worthwhile for major renovations. The interest rate is just around 2 percent. In addition to the low-interest loan, homeowners must secure this type of loan with a land charge. This means additional work and costs for land register and notary costs as well as valuation costs. Therefore, the mortgage loan is only advisable for more extensive measures of more than 30,000 euros for modernization.
With a smaller sum, home loans make more sense. You have fair conditions, flexible repayment modalities, no processing fees and homeowners can make free special repayments at any time. If the property is already encumbered with an existing loan, homeowners should also opt for an installment loan.
Government funding for the renovation
As soon as homeowners have to undertake renovations, it is worth taking a look at KfW Bank’s funding programs. KfW loans to finance renovation work are available from 0.75 percent. In the best case, customers receive a repayment subsidy that exceeds the interest, so that they receive more money from the bank than they have to pay back.
KfW offers programs for energy-efficient renovation or age-appropriate renovation. Both programs can also be used by tenants. However, an expert is required for KfW subsidies to confirm that the construction work has been carried out correctly. The German Energy Agency has one Overview of certified experts.