Renovation Loan In Germany

Key takeaways

• Only property owners can get renovation loans in Germany.
• The interest rate on renovation loans is lower than on personal loans, as the banks take property as collateral. 
• Banks may request a renovation loan entry in the land registry paper  (Grundbuchauszug).

This is how you do it

• Make a list of renovations you want to carry out and how much they cost.
• Add 15 to 20% on top of the planned renovation cost. This gives you the total renovation loan amount you need.
• Compare the loan offers on comparison portals: Smava*, Finanzcheck*, Check24*, and Verivox*.
• If you want to carry out extensive renovation or modernization, consult home loan brokers like Dr. Klein* and InterHyp*.
• Check the loan terms and conditions carefully. Right loan terms can save you thousands of euros.

Table of Contents

What is a renovation loan in Germany? 

A renovation loan is a type of loan that you can use to renovate your property. A renovation loan is given for a particular property that you own. So, tenants cannot get renovation loans in Germany. 

The only option for tenants is to get a normal installment or personal loan to renovate the rental property.

The biggest advantage of a renovation loan is that it can be obtained at a lower interest rate than installment loans. The low-interest rate is because your property acts as a security for the bank, reducing the bank’s risk.

What is the difference between renovation, sanierung, and modernization? 

In Germany, there are three different terms to describe the work you want to do on your property:

• Renovierung (Renovation) refers to the activities you do to maintain the property’s value, such as painting the walls or changing the floor.
• Sanierung is the activities to fix serious defects in the property, such as changing the house’s electric wires, rebuilding the bathroom, fixing the roof, etc. There is no word in English for Sanierung.
• Modernisierung (Modernization) describes the activities you do to upgrade or modernize your house, such as installing energy-efficient heating systems and better-insulated windows. 

Banks in Germany distinguish between the three terms and offer different loan options for each. So, it’s important that you know what you want to do with the loan amount before applying.

How do you get a renovation loan in Germany?

You can compare renovation loans on comparison portals Smava*, Finanzcheck*, Check24*, and Verivox*.

• Be sure to select the loan purpose as “renovation” when comparing loan offers on the portals. Renovation loans are available at a lower interest rate than personal loans.
• Enter all the information asked on the portal and apply.
• The banks will process the data and may ask for further information and documents.
• If your application is accepted, the bank will give you a loan offer. The interest rate offered might differ from what you saw on the portal. On the portal, banks show you the best interest rates.
• If you like the loan terms and conditions, you can sign the contract and send it back.
• The bank will issue the loan amount within a week. Depending on the bank, they may transfer the amount to your bank account or pay the construction company directly as per the invoice. 

Banks may ask for receipts for the renovation work (material and labor). So, you should keep them with you. 

If you are doing extensive modernization work, you should also consult loan brokers like Dr. Klein* and InterHyp*.

You also need the receipts to claim tax benefits in Germany.

What documents do you need to get a renovation loan in Germany?

• When getting a renovation loan, you should be able to prove that you are the property owner. You can do this by showing the entry in the land register document (Grundbuchauszug).
• Personal identification proof like passport, visa, etc.
• Proof of income like salary slips, bank statements, etc.
• Assets like investment, savings, car, etc.
• Liabilities like existing loans, child support, etc.
• Your approval to request your Schufa score.

NOTE: Most banks require a loan entry in the land register papers for the renovation loan.

The renovation loan can be used only to renovate the property. If you want to use the loan amount for something else, you must get a personal loan instead.

Who can get a renovation loan in Germany?

In Germany, only property owners can get renovation loans. If you want to renovate the property as a tenant, you must get a personal loan instead.

Other things banks check before issuing the loan.

• Your Schufa score. The higher the score, the better your chances of getting a loan.
• You have a residence in Germany.
• You have a permanent residence permit. Blue card holders can also get a loan but pay higher interest.
• You have a bank account in Germany where the loan amount will be deposited.

For what purposes can you use a renovation loan?

You can use a renovation loan for

• Cosmetic repairs
• Painting or wallpapering
• Replacement of interior doors
• Laying new floors
• Renovation of the bathroom

How much renovation loan can you get?

You can take up to 100,000 € of renovation loan in Germany. But how much of a loan you’ll get depends on the following:

• cost of renovations you want to do in your house.
• your income and expenses
• creditworthiness
• by when you want to repay the loan. A renovation loan must be paid off before the next renovation is due.

Average costs of renovating a house in Germany

Here are the average renovation costs in Germany as of June 2024.

• Roof insulation (Dachsanieurng): 100 to 450 € per m2. It should be done every 40 to 60 years.
• Bathroom: 20,000 € approx. But the costs may vary depending on your bathroom size and if you have any special requests. It should be done every 20 to 30 years.
• Changing the floor: 18 to 22 € per m2 plus labor costs. It should be done every 10 to 40 years.
• Installing new electric wires: 90 to 140 € per m2. It should be done every 30 to 40 years. 
• Windows: 450 to 650 € per window plus labor (Every 20 to 40 years)
• Doors: 150 to 200 € per door plus labor (Every 20 to 40 years)

What should you consider when getting a renovation loan? 

• Loan amount (Darlehenssumme): Renovations often surpass your planned budget. Thus, always request 15% to 20% more loan amount than what you think you need.
• Loan term (Laufzeit): The quicker you repay the loan, the less interest you’ll pay. So, maintain a balance between the loan term and monthly installment.
• Special repayment option (Sondertilgung): This option allows you to pay additional money on top of your monthly installments to reduce the loan principal. Thus, you can repay the loan early and pay less interest.
• Pause installments (Ratenpausen): If you are self-employed and don’t have a stable income, you should get the option to pause your installments. It allows you to pause the monthly installment payment without penalty. 
• Change the repayment rate during the loan term (Tilgungssatzwechsels): No one knows what the future holds. If your income reduces in the future, having the option to readjust your monthly installments will come in handy. Similarly, if your income increases, you can pay off the renovation loan more quickly.
• How is the interest rate calculated? You should always check the total loan cost instead of the interest rate. Banks use different ways to calculate the interest rate in Germany. One loan may cost twice the other, even at the same interest rate. Learn more about it in our guide on interest rate calculation in Germany.