How to Finish off with a loan?

02 Feb

When buying a property from a developer – the standard is usually bare walls and floors. However, a used apartment often needs refreshing or rearranging. Is it possible to finance this type of construction work? Does it require a loan exceeding the value of the property?

At the outset, it should be noted that finishing or renovating is one of the basic goals of a mortgage. Banks treat this as a housing purpose and apply the same price conditions.

How is it possible that the bank is ready to give a loan

How is it possible that the bank is ready to give a loan

For the entire price of the apartment and add to the finish? After all, only a few finances over 100% of the property value. The answer is simple. When determining the value of collateral, i.e. real estate, the bank adopts as its 100% future value after finishing or renovation.

Let’s assume that we are buying a flat from a developer for 400,000 USD and an additional 50,000 is needed. USD for its finishing. The target value of the apartment will be 450,000. USD, i.e. in total the loan will be granted for 100% of the value. Of course, the bank will only add the amount that it believes increases the value of the collateral.

Therefore, it may happen that if the bank measures the value of the apartment after finishing works at 430 thousand. USD, additional funds will be granted in the amount of only 30 thousand. The other 20 thousand we will have to layout ourselves.

It is quite easy to calculate it with a development flat because practically all the extra amount increases its value. In the secondary market, the estimates are more individual. 50,000 put into renovation here USD will not necessarily increase the value of the collateral by the same amount. In general, however, there is no major problem with obtaining a loan for such a purpose.

You need to prepare an estimate of work on a special bank print

You need to prepare an estimate of work on a special bank print

However, you must remember that the values ​​entered are as real as possible, as the bank may not accept the understated estimate. Too high an amount can also be questioned and the loan can be reduced to a level accepted by the lender.

This is understandable, as too low an amount for renovation will not further increase the value of the property, and the too luxurious finish does not give the bank a guarantee that the collateral is actually worth so much. In any case, the difference can, of course, be covered from its own resources.

Unfortunately, it will not be possible to finance the entire interior design with such a loan. The rule here is quite simple: you can credit what is permanently associated with the property and for what will increase the value of the apartment.

Therefore, the bank will lend for installations, plasters, partitions, painting, tiles, terracotta, floors, balustrades, etc.

The bank will not grant a mortgage for the purchase of furniture, TV and other moving parts.

Part of the equipment increases the value of the property, which is why in most banks you can get a loan for the kitchen, built-in kitchen appliances, built-in wardrobes, bathroom equipment such as a bath, shower, sink, toilet, and bidet.

The moment of launching the loan for the interior arrangement is specified in the loan agreement. However, you can specify general principles that banks apply.

If the apartment is purchased from a developer


The finishing amount can be started after the technical acceptance of the apartment, before the notarial deed. When buying a used apartment, payment will be made after the notarial deed. However, if the loan for renovation concerns already owned real estate, you can apply for payment immediately after signing the loan agreement.

In the case of higher loan amounts, it can be paid out in tranches. To get the next tranche, please submit photos from the work already done to the bank. Some banks require an inspection of the property by an authorized person and it costs about USD 100. Today, invoices are rarely required to settle works.

Therefore, you should not be afraid to apply for a loan for finishing or renovation, even if the bank is financing the full amount of the apartment. In the eyes of the bank, property in the good technical condition is better than a building that has not been renovated for many years.