Credit for modernization
Anyone who wants to tackle a modernization of their residential real estate needs to plan for greater spending in the future. These can rarely be paid entirely out of pocket, which is why a loan for modernization is usually the best way to finance the project. Modernization loans also bring substantial benefits over normal mortgage lending, making the renewal of living space even more rewarding.
Modernization loans – facts and characteristics
Modernization can bring many benefits. In most cases, they even bring significant savings when, for example, a new heating system to be installed or the outer walls to be insulated. In addition, after a modernization in your own home, you feel much more comfortable again. So in most cases, the question of why does not arise in the first place, but more important is how. After all, modernization is expensive and can quickly cost several tens of thousands of USD.
However, before requesting a loan for the modernization, it should first be ascertained whether the upcoming works are really a modernization and not just a renovation. A new coat of paint on the facade does not make any modernization, but the complete thermal insulation already. Maintenance work is therefore not considered a modernization. Rather, structural changes have to be made to the property, so that a special loan for a modernization can be applied for.
In view of the large sums involved, many applicants will first think of typical home finance, as offered by many banks. But the period until the payout can drag on here. In addition, mortgage lending is only granted from certain sums, which are usually between 40,000 and 60,000 USD. That is why many banks offer special long-term modernization loans that are tailored to their needs. These first and foremost bring with them better flexibility, because the terms can be set up here for shorter periods of a few years.
Another essential difference to mortgage lending arises already with the application or the collateral, which are to be advanced. Often, the current payrolls are enough to get credit for modernization. In addition, there is only evidence that the owner-occupied home is actually used. Land register entries, as is customary in mortgage lending, are in most cases omitted here.
In most cases, a modernization takes place in order to save energy and thus costs in the future. This is also called energetic refurbishment and, calculated carefully, is a consistently worthwhile undertaking. Since energy saving is always very popular with the state, it is also possible to acquire subsidies in the form of heavily subsidized loans. For example, new, energy-efficient heating systems based on renewable energies can be subsidized by the Federal Office of Economics and Export Control (BAFA). The Intrasavings bank is also implementing several programs with which modernization can be carried out with extremely low interest rates, provided that certain standards, such as the Intrasavings bank Efficiency House Standard, are targeted.
In any case, the possibilities should be checked before applying, because a cheap as well as subsidized loan for the modernization, the costs for the energy renovation will pay back in a much shorter time. In addition, the value of the property increases considerably, which, in addition to the fact of doing something for environmental protection, also makes an energy-saving refurbishment more sensible.