Taking over the parental home - how to sensibly finance renovation/refurbishment?

Hello dear home builders,
my fiancée, soon to be wife, and I want to take over the parental home. The volume of business for the upcoming tasks is approximately €200,000, the largest currently estimated items are:

Renovation of the heating system €35,000
Renewal of windows+doors €25,000
Installation of two new kitchens €25,000
Renovation of two bathrooms (ours/my mother’s basement apartment) €23,000
Various furniture (sofa set, dining room furniture, ...) €20,000
Drywall work €10,000
Installation of an outside staircase €5,000

In addition, walls are to be removed, new tiles installed, etc. etc.

We are currently dealing with the financing and are encountering some problems and questions: Due to the variety of trades, we would like to work through a priority list, doing the most important things first (e.g. heating, windows) and gradually see how much remains. Now, various loans are tied to specific draws – e.g. craftsman invoices. Can someone perhaps share from experience how strict the banks are? Or whether 100% proof is required? The money is to flow 100% into the house, but, for example, we would also have a need to account for personal labor, furniture, or second-hand building materials. What is your experience with this? And are detailed cost estimates expected when applying for a loan? I would be very happy to hear about experiences!

Best regards from Münsterland,

Eva & Marcel

Good morning you two,

from experience I can see that there are indeed some differences between various credit institutions. It will also depend on the value of the property. However, there are a few providers who offer such financing. If you need tips here, feel free to let me know.

Best regards from the North

Flo

Hello,
we were able to draw the first 20,000 euros and then had to submit invoices (materials/tradesmen) in order to draw the next 20,000 euros.
After the last payment, the bank asked for the invoice. However, since we had done a lot of the work ourselves and therefore bought a lot of materials, we had a complete A4 folder full of small invoices. I asked the bank if they wanted to have this folder for review. This was understandably declined. This means that everything except the last 20,000 euros was checked in our case.
My wife and I have also always wondered how others, for example, manage to include a new car purchase in the [Immo-Finanzierung]...

We are currently dealing with the financing and are encountering some problems or questions: Due to the variety of trades, we would like to work through a priority list, starting with the most important things (e.g. heating, windows) and gradually see how much remains. Now, various loans are tied to specific drawdowns – for example, craftsmen’s invoices. Can anyone perhaps share from experience how strict the banks are? Or whether a 100% proof is required? The money should flow 100% into the house, but, for example, we would also account for own work, furniture, or second-hand building materials. What is your experience with this? And are detailed cost estimates expected when applying for a loan? I would be very happy about any experiences!

For the loan application, you don’t need specific cost estimates, but a cost and trade planning created by you or a planner. Processing, for example, as just wrote. BUT: Because the bank values the house and the renovations (not just any renovations like new wallpaper) are included in the house valuation, the entire list should also be worked through. Otherwise, in the worst case, the bank might come at the end and say, “But the house is not worth what we estimated. The new roof and the exterior insulation and finish system are still missing. Please increase the condition by 1% or repay a loan amount of X€, otherwise the loan-to-value ratio is too high.”

Due to the large number of trades, we would like to work through a priority list, with the most important things first (e.g. heating, windows)

Here I would definitely see the structural engineer for the removal of the walls at the top of the priority list. Much depends on that.

Installation of two new kitchens €25,000 Various furniture (sofa set, dining room furniture, ...) €20,000

Furniture and kitchens are not part of the regular financing. You have to finance that separately. In the end, these are always expensive consumer loans: 0% credit from the seller, or a massive cash purchase discount. Therefore, it’s not noticeable that you are actually paying about 6% or so.

we were able to draw the first €20,000 like this and then had to submit invoices (materials/craftsmen) in order to be able to draw the next €20,000.

It was similar for me. You get part of it like this, gladly also everything left over without an invoice.

My wife and I have always wondered how others accommodate, for example, a new car purchase in real estate financing…

Maybe with the money that "remains." And maybe it was only a down payment and the rest of the car is leased or financed. With cars it’s like with houses, a lot is concealed and sometimes lied about. Of course, you can also buy furniture with the leftover money.

Good morning,

With what value does the bank assess the house without renovation? We also needed a 200,000 loan from the bank for expansion/renovation. However, the house was already valued significantly higher in its current condition. We only had to create a rough list to allocate the 200,000€ and received the entire amount in one lump sum. We did not have to submit any invoices. In the end, someone from the bank just came by to take photos.