German Mortgage

Property Modernization in Germany: Costs And Home Loan Options

Whether you have lived in an old property (Altbau) for years or you have just purchased one, many homeowners often come across the same question – should I modernize it? How much financing do I need? Can I get a home renovation loan? For example, if energy efficiency is important to you, you may consider it since this would save your energy costs significantly. This article illustrates the approximate property modernization costs and explores the available options for mortgage lending.


What is an Altbau?

Real estate agents, landlords and anyone else involved in German real estate market throws around the term “Altbau” – a lot. The word routinely puzzles internationals and expats on the hunt for property in Germany. What does it mean?

Generally, buildings that are built before 1948 are considered as Altbau. There are several features that explain their special charm. For example, they usually have very large rooms with high ceilings, real wood floors and stucco ceiling. When you buy an apartment in Germany, you will find that ‘Altbau’ is quite prevalent in the real estate market. One of the few disadvantages of Altbau, however, is that it usually requires renovation.


How much should you budget for property modernization?

First of all, the lender may be able to fully cover property modernization costs. If you plan to revamp your property, you should speak with a mortgage advisor and make plans for financing first. Of course, the exact modernization costs can vary depending on the scale and scope of the project. Therefore, you should always consult an architect or construction expert for an accurate assessment. Although part of the renovation costs can be tax deductible, the German legislature has a limit of €1.200 per year. Since you would have to bear most of the costs, you should always consider talking to an independent mortgage broker to understand various financing options.

Available financing options for property modernization

Funding programs

Many people do not know that reconstruction is often eligible for funding from the state development bank (KfW) or the Federal Office of Economic and Export control (BAFA). For instance, KfW’s “Energy-efficient refurbishment program” offers funding for energy efficient renovations. You may qualify for funding if you want to replace the heating systems or install roof insulation. KfW loans are particularly attractive because it has very low interests and a repayment subsidy.

Another funding program is “Age-appropriate Conversion” by KfW. Senior citizens, individuals with limited mobility and families with children are eligible for this program. Eligible applicants may receive financing for remodelling to reduce barriers, building lift facilities, or burglary protection.


Consumer credit loan

For projects that require smaller sum of money, such as purchase and installation of a modern kitchen, buyers may apply for a consumer credit loan. And in the case of mortgage lending, the costs of a kitchen are sometimes considered as non-deductible inventory costs. However, consumers must repay the loan on time, as this would affect their credit scores and result in penalties otherwise.


Can I use bank loans to fund the modernization costs?

You should also bear in mind that for projects that maximize the value of your property, including improving floors and lighting, you are eligible for loans from bank. But for everything else that is movable, such as remodelling your kitchen, you would need to finance it with your equity.


We’re here to help

It can be a daunting task to find the right lender that offers the best deal when you plan to modernize your property. Discussing with a mortgage expert can help ensure that you receive a tailor-made solution. Being well informed about the estimated total cost, funding opportunities and financing options can surely save you time and money!

We are happy to answer any questions. Via email at or by phone 0800 05 28000. You can also start with the LoanLink mortgage illustrator here:

Got a question about the real estate valuation or the mortgage pre-approval in Germany? Contact us!

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