150k for renovation - how to best finance additionally?

Hello everyone,

a brief introduction: We are a young family (32) with 2 children (1 and 2 years old). Husband earns 3k net/month. Wife (civil servant with lifetime tenure) will probably work 50% again in 1 year – then about 1.5-2k net.

This year we bought an older house (approx. 300k). Previously, we sold our old house. The loans concluded for the old house in 2015 were transferred to the new house via mortgage swap. About 100k are still to be repaid (annuity loan with 15 years fixed interest, cancellation would be possible at the end of 2025). The 2nd component of 60k is a home savings contract with a TA loan and has an interest lock-in of almost 23 years until full repayment. My Riester subsidy also flows into this.

Various mandatory or optional renovation measures are due in the foreseeable future (roof approx. 85k less subsidies, heating approx. 20k including subsidies, bathroom including sewage/water throughout the house approx. 30k, kitchen approx. 20k, electrical approx. 5k and various small measures, I also estimate about 10k). We want to contribute approx. 30k of available equity to the renovation. Theoretically, more would be available (a total of approx. 50k), but we would like to keep 20k aside as a reserve. Otherwise no further debts.

So we are talking about an approximate expense of about 150k for the renovation.

So far we pay approx. 630€ annuity loan and 250€ for the home savings contract. We actually do not want to pay more than 1200€/month for the house, even though more would be possible.

I am now wondering how we can best represent this financially.

I would prefer a single component, as I do not like to have many different loans running simultaneously. If we were to cancel the annuity loan now, we would have to pay about 7-9,000€ in prepayment penalties. I want to avoid that. The interest rate there is 2.5%. Surely one option would be to increase the existing loan. But at 2.5% that probably makes little sense. Actually, I wanted to take out a 60,000 KFW loan for the roof, but that is currently not an option.

I am thankful for any advice :)

If we were to terminate the annuity loan now, we would have to pay about €7,000-9,000 in prepayment penalties.

However, the bank can also object to a termination. You are not selling after all. But there is nothing against taking out an additional loan on current terms with the same bank.

Actually, I wanted to take out a €60,000 KFW loan for the roof, but that is currently not an option.

Check with your local state bank. The subsidies may still be running there. I had at that time taken the NRW.Bank building renovation loan.

Of course, one option would be to increase the existing loan. But at 2.5%, that probably makes little sense.

Increasing is not an option anyway, as this is not possible at all. You simply get a new loan (but only from the bank that also issued the first loan). The bank re-evaluates the property and you get a market-standard interest rate.

I would also go to the currently financing bank. Then take out a new loan there, it will be secured by the registered mortgage, right? Fixed interest rate until 2025 and then refinance together.

Please terminate the Riester home savings contract first. It only costs money and makes everything inflexible. You can already take out a new loan with a bank of your choice and have 150,000 euros paid out immediately and the rest as a forward loan until 2025. With 50% part-time work, 2,000 euros net, I would work full-time and leave the man at home. You don't have to do all the renovations at once and at that price. A complete conversion of the heating system is never worthwhile, and a burner replacement is significantly cheaper, or switching from oil to gas as well.

But the bank can also object to a termination. You are not selling, after all.
However, there is nothing to prevent you from taking out an additional loan with the same bank at current conditions.

Check with your local state bank. The subsidies might still be running there. I had taken the NRW.Bank.Building Renovation Loan back then.

The bank can't object if I terminate after 10 years. And if I paid the prepayment penalty, I could get out immediately, right?

Please terminate the Riester building savings contract first. It only costs money and makes everything inflexible. You can already take out a new loan with a bank of your choice and have €150,000 paid out immediately and the rest as a forward loan until 2025. With 50% part-time and €2,000 net, I would work full-time and let the man stay at home. You don't have to do all the renovations at once and at that price. When it comes to heating, a complete conversion never pays off, and replacing the burner is much cheaper, or switching from oil to gas as well.

That sounds interesting. But how does that work with the existing mortgage? That would still be in place until 2025. The new mortgage with a new bank would then be higher as well. How does something like that work?