Financing of purchase and renovation

Hello everyone,

I would like to ask for your opinion and advice on the following case:
Let’s assume I am planning to buy a house in Baden-Württemberg at a total price of €530,000 (including notary, real estate transfer tax, and broker fees). Since the house was built in 1952 and needs complete refurbishment, one could estimate about €270,000 for the renovation costs.

Now let’s assume that the equity amounts to €270,000 in total, of which a maximum of €200,000 is to be invested.

Due to the need for renovation, one could participate in some loan programs through BAFA and KFW and secure some funding. Perhaps from the total renovation costs of €270,000, around €180,000 could be financed through KFW loans and about €30,000 as a grant.

Now to the actual question:
As I understand it, we first have to complete the house purchase and only then take on the loan for the renovation, as the broker doesn’t want to wait several weeks for all cost estimates from the various tradespeople, which would be required for the renovation loan (especially KFW but also house bank). Correct?

How would you allocate the equity between the two loans? Put it all into the house purchase? Or the other way around? Or split it? Are there advantages and disadvantages?

With the renovation loan, I could finance more through KFW and might possibly need less equity for a better interest rate.

So I didn’t need a single cost estimate for the [Sanierungskredit] from the [KfW]. I simply took out a certain amount and hoped to meet the efficiency standard with it. We took out the [Sanierungskredit] a few months after buying the house, but it would have been possible at the same time as well.

Now to the actual question: As I understand it, we first have to complete the house purchase and then tackle the loan for the renovation,

No, do everything in one go.

waiting for cost estimates from the various craftsmen, which would in turn be necessary for the renovation loan (especially KFW but also the house bank). Correct?

Use rough estimates. That’s sufficient for now.

How would you apply the equity for the two loans?

Standard is upfront. So everything at the beginning.

We faced a similar problem. To apply for the KfW loan, you already need very precise data and calculations. It must be clear in advance what will be achieved. If the agent/seller does not want to wait, then unfortunately that's your bad luck. I don't know how easy it is to take out a second loan for renovation after buying the house. Our bank advisor said that it would then have worse conditions. We ultimately did not use it, so I do not know if the statement is accurate.

I don't know how easy it is to take out a second loan for renovation after buying the house. Our bank advisor said that this would then have worse conditions.

It is a subordinated financing with no or only minimally assessable security. Hence the worse interest rate. But in the end it doesn't matter either, since the first loan got a better interest rate for it.

Hello, for your own safety you should have not only rough but very detailed cost estimates for the renovation. How do you come to "approximately" 240k? Was a professional already involved?

For verification at this volume, one DIN A4 sheet will not be enough.

Otherwise regarding the payout. One purchase payment where you bring in your 200k equity. For the renovation, only loan funds will be available. And at the latest then invoices must be presented.