Use of credit - Renovation costs

Hello everyone

My question also concerns the area "Use of the loan". We want to buy a house. Purchase price EUR 100,000, equity 15%, so far so good, all clear. Now there are renovation costs that need to be financed as well. Amount approx. EUR 15,000 (15% equity based on EUR 115,000).

How do you calculate that now, or rather, what proof does the bank want to see?

For example, we have estimated:

Floor coverings EUR 2,500
Fixing the terrace EUR 1,500 (just sunken wash concrete slabs)
New windows approx. EUR 5,000
New heating boiler approx. EUR 5,000

If it turns out after the purchase that the costs are lower, is it then allowed to use the money for something else or not??

Thanks for your assessment and help
DPM

The sum you receive from the bank must demonstrably flow into the house! Nothing will remain anyway, as a house always incurs costs, and if there is money left over, paint the facade, build a carport, solar expansion, or whatever, there are 1000 ways to invest money into the house.

Hello DPM,

I share blurboy’s opinion. In my 22 years of professional experience with the purchase of a used house in combination with modernization measures, I have never seen money left over at the end of the measures.

It is often rather the case that additional financing is needed because the modernization costs usually turn out to be higher than expected.

If the modernization costs are to be considered by the bank as a value-increasing measure (and I assume that this will be the case for you), then all modernization measures must also be documented by invoices or at least photos.

By the way, most banks only recognize 50% of the modernization costs as an increase in market value.

With the information you have provided, your equity capital is just enough to cover the modernization.

However, in addition to the house purchase, at least 5.2% acquisition ancillary costs must be added (3.5% property transfer tax and about 1.7% notary & court costs). Possibly also a broker’s commission?!

These are costs that do not increase the market value of the house and therefore must also be covered from equity capital, or financed through somewhat more expensive subordinated loans.

Best regards M. Thiemann

How big is the house? I consider €2,500 for the floor to be too low, and there are also no costs included for painting and wallpapering the walls (which will definitely be done after the windows are replaced). What do the bathroom and kitchen look like? Are they all usable?