Renovation costs for financing existing properties

How do banks actually handle renovation & refurbishment costs in financing? Are these included in the financing as value-enhancing (1:1)? Examples: In the existing property, one would like to get rid of the old textured wallpaper and have settlement cracks and other unaddressed damages fixed and smoothed by the painter and use painter’s fleece instead. Or renew the sanitary fixtures, retile the shower, etc. Upgrade the terrace on the property and redesign the garden. Does the cost estimate of the measures together with the purchase price go into the loan amount of a real estate loan?

How do banks actually handle renovation & refurbishment costs in financing? Are these included in the financing value-enhancing (1:1)?

Renovation usually mostly yes, refurbishment no. So a completely new bathroom or electrical system would be fine. Old laminate replaced by new parquet, at most partially. Painting the walls, not at all. The calculation problem is that you are buying and paying for a functioning old property. The new electrical installation adds value, but not completely, since you already paid for the old electrical installation when you bought the property.

In the existing building, one would like to get rid of the old textured wallpaper and have settlement cracks and other untreated damages smoothed out and painted over with painter’s fleece.

That doesn’t really increase the value of the property. It just makes it look nicer.

Or renew the sanitary fixtures, re-tile the shower, etc.

Partially creditable.

Upgrade the terrace on the property and redesign the garden.

Here too, any increase in value is limited.

Does the cost estimate of the measures go together with the purchase price into the loan amount of a mortgage loan?

You mean that the purchase price together with maintenance (which is what most measures are) represent the value of the house and can be financed by the bank? Of course that’s possible, but then it would be a loan-to-value ratio well over 100% and correspondingly expensive. Good creditworthiness would be required. However, if the creditworthiness is that good, there should actually be enough equity available. In the end, nothing else is done in the purchase you described than what is done daily in older houses and rental apartments. Maintenance and cosmetic repairs. Not really value-enhancing.

To my knowledge, renovations are also only valued at about 50%. At least, that's how the invoices are when it comes to loan approvals. It makes sense: if you install a kitchen for 50k, you certainly can't sell the house for the same amount more. And that's the only thing that matters to banks when it comes to financing and collateral.

To my knowledge, renovations are also only factored in at about 50% of their value. At least, that's how the invoices are if it comes to granting credit. It makes sense: if you install a kitchen for 50k, you certainly can't sell the house for the same value more. And that's the only thing that matters to banks when it comes to financing and collateral.

Only measures that permanently increase value are considered, such as a new heating system, roof, windows, new bathroom.... kitchen, painting, furniture, lamps do not count!

Only permanently value-enhancing measures are considered, such as a new heating system

But also 100%?

But also 100%?

Depends on what is being done. For example, replacing a 10-year-old roof = no, converting a 40-year-old oil heating system to a gas boiler = at least 50%, rather more, installing ETICS = fully deductible