What is the best way to finance a renovation?

Loan or mortgage

For smaller projects, a modernisation loan is often a suitable option, as it usually does not require the registration of a land charge. For more extensive projects, it may be more cost-effective to include the costs directly in the mortgage. Many banks also take into account the value of the property following modernisation.

Government grants

It is worth checking for any available grants before work begins. This is because many grant schemes require the application to be submitted before the project starts.

Under certain conditions, KfW offers funding opportunities for energy-efficiency refurbishments and the replacement of heating systems. For families, for example, the ‘Jung kauft Alt’ programme may be an option; this supports the purchase and energy-efficiency refurbishment of older residential properties with low-interest loans.

Which funding is actually available depends on the specific project and the current programme conditions.

Tax benefits for owner-occupiers

Those who live in their own property may, under certain conditions, also claim tax benefits for energy-efficiency refurbishment measures.

The tax relief amounts to 20 per cent of the eligible costs, up to a maximum of 40,000 euros per residential unit, spread over three years. It is not possible to receive additional KfW funding for the same measure.

Tax benefits for investors

For let properties, loan interest can generally be claimed as income-related expenses for tax purposes. Maintenance costs are also directly deductible under certain conditions.

However, renovation work carried out shortly after the purchase of a property deserves special attention. If the repair and modernisation costs within the first three years following acquisition exceed 15 per cent of the building’s acquisition cost (excluding VAT in each case), they are generally regarded as acquisition-related production costs. They cannot then be deducted in full immediately, but are taken into account via depreciation.

It is therefore advisable to seek tax advice at an early stage.

RIEDEL Finance can assist you in selecting suitable financing and assessing potential grants.