Question about a loan with a mortgage

Good evening,

perhaps someone of you knows the following situation:

My husband and I have been transferred the house of my deceased grandparents. (Value about €180,000 including the property).
However, nothing has ever been renovated in the house, which means we need about €180-190,000 to completely renovate the house.

Our income situation:
He: Net €2100, permanent contract, employed there for 10 years
Me: currently only €600 because of 16-month-old son
+ €184 child benefit
Equity capital €10,000

My question is now whether someone can estimate the chances of getting the loan.
If a loan is completely covered by the value of the house, is a full credit check (with Schufa etc.) still carried out? Or is the house sufficient as collateral to get the loan?

Best regards

I think the bank will definitely want to check your creditworthiness - no matter what you want to pledge as collateral. Also take a look at the options from [Kfw], which might be partially attractive for you. If you fear having negative entries, get a report from [Schufa]. If your suspicion is confirmed and you cannot do anything about it, talk openly with the bank about it; they will tell you before the contract review whether yes or more likely no. 180 T€ with 2700 € net over ~ 10 years fixed, for example, you could get about 500 € with 1.5% repayment and about 1.6% interest. Over 15 years with 1.5% repayment and about 2.1% interest, it would be about 550 € per month. Of course, just very roughly. Already manageable. What will be interesting is whether the bank values the house as you do - if it is a good location with high land prices, the bank will certainly prefer your project rather than if it is deep in the middle of nowhere. However, the bank will probably not count the renovation costs 1:1 as an increase in value. Where you end up in the loan-to-value ratio cannot be predicted like this.

The following things are strictly checked.

1) Creditworthiness
2) Credit rating
-a) Material credit rating
-b) Personal credit rating
3) Collateral
-a) Value retention
-b) Realizability

Just because 3 is given, 1+2 cannot simply be ignored.

Although 2 becomes easier if 3 is given, for example, affordability must still be guaranteed and 1 must be positively determined.

My husband and I were transferred the ownership of my deceased grandparents' house.

You inherited it and transferred half to your husband? None of my business, maybe just imprecisely expressed, maybe irrelevant ...

(Value about €180,000 including the land). However, nothing has ever been renovated in the house, which means we need about €180,000-190,000 to completely renovate the house.

The renovation need seems high to me if the house is still supposed to have value. Where do these numbers come from? Your income isn't that high (considering the house issue, apart from that already ;-) ), you have no equity (10,000 euros is just the emergency fund). What are your plans with the house? Why renovate?

maybe selling is the better alternative after all. with the equity, you can also go shopping. the value probably only comes from the land if the renovation costs are so tremendously high. instead of going into such heavy debt and having the renovation work done by some craftsmen, shouldn't one rather consider taking the big money and thinking of something else. houses in need of renovation are for craftsmen who want to do something themselves. of course, you can't do everything, but at €170,000 that sounds to me like doing nothing. and it's hard to estimate what costs might still come up.

Hello eliah,

180,000€ for renovations is quite a lot. That’s not to say it can’t be worth it, because after all, you then have a house worth 300,000€ or more for which you only had to spend "180,000€". Setting that aside, maybe a suggestion makes sense:

Spread the renovation over 2 or 3 phases. I know many homeowners who see their house as a project that they continuously repair and improve as they please.

So at first, do only the absolutely necessary things to be able to live there: heating, roof, interior work (bathrooms, etc.). Mainly focus on the interior work so you have it as nice inside as you want it.

And then in 2 or 3 years, when you’re working again (if you plan to), the next steps come, like facade, windows, conservatory, whatever.

If you want to approach it somewhat like this, also make sure your financing is flexible and that you have money available again after a few years.