House financing + renovation

We plan to buy and renovate a house built in 1957.

The price is 85,000 + 70,000 renovation costs. (with rough cost estimates and comparisons, the renovation costs are around 55,000, but this way we still have a buffer)

We will pay ancillary costs such as broker fees, notary, and property transfer tax from our equity.

This leaves a financing amount of 155,000. At the moment, only our house bank can offer this to us.

It consists of:

50,000 Kfw
85,000 from the bank at 2% interest fixed for 10 years.

The repayment rate is 3%, so the monthly installment is about ~650€

I have already asked about a 15-year fixed interest period. This is apparently not so easy with the bank and our project, but an attempt will be made to achieve a 15-year fixed interest period. Our advisor wants to initiate this.

She also, of course, offered us a building savings contract. With the low rate we have, it makes sense to me to pay a little extra into the building savings plan on the side, so that after 10 or 15 years we have secured interest rates and can pay off part of the remaining debt separately.

Does that make sense to you, or would you prefer to increase the repayment rate?

With an old house, something can always happen, of course, and over the years many things will naturally still have to be done to the house (repaving the driveway, possibly a second carport, renewing the facade...)

With a high repayment rate, I would then have no or less opportunity to put something aside for repairs on the side.

So I think the financing for a renovation is really very good.
So if you calculate it that way, after 10 years there is still a residual debt of just under 100,000 euros. For the rate to be higher or equal after 10 years, the interest rate would have to rise to just over 5 percent.
A building savings contract does not make much sense due to the closing costs.

What might still be very manageable, I think, is if you set the repayment rate to 4 percent. Then the residual debt would be 15,000 euros less. And the monthly burden would increase by 125€.
I would try to agree on a flexible adjustment of the repayment instead of a longer fixed interest period or a multiple free change. And increase the repayment as much as possible and lower it if necessary. That is definitely easier than a special repayment.

But my experience is that once you start renovating, you usually need significantly more money, because you want it differently after all or because surprises come up that also have to be dealt with additionally.

You should already plan a buffer of at least 10,000 during the renovation.

PS: We have exactly this story behind us. And it was significantly more expensive than expected. But that was not so much due to the surprises, but to the wishes that developed during the renovation phase.

The solution by is doable. I would probably go with special repayments. That way, you can save up a little reserve on a daily allowance account alongside, and if there is nothing to do on the house (usually bigger projects are foreseeable), you put part of it as a special repayment into the loan. I particularly like this flexibility of special repayments. However, you shouldn’t leave the money in the account but consistently set it aside.

By the way, 55k€ renovation costs + 15k€ buffer don’t sound excessively high now. I have already heard much larger amounts here.

Oh, I forgot that the kitchen is financed with a 0% loan. The costs will be added monthly.

The 55,000€ is already calculated generously and involves a lot of personal contribution. Of course, more is always possible, but we didn’t want to borrow too much so that the bargain stays a bargain :D

After all, you get 100% of the renovation costs financed by the house bank. Many banks only go up to 50%. I would also increase the repayment rate and/or wait for the 15-year offer. You probably won't receive many offers for your project. Have you also contacted the common (internet) brokers?

The 55000€ is already generously calculated and involves a lot of personal effort. Of course, more is always possible, but we didn’t want to take on too much so that the bargain remains a bargain :D

I can certainly understand the wish, but there are also certain requirements regarding the Energy Saving Ordinance that definitely have to be met, and then there is always the tedious issue with personal effort, which can quickly become overwhelming if you take on too much. And if you don’t even live in the house yet, you have double costs for rent and loan payments.