The modernization loan

Many consumers today own their own property. In most cases, the property is repaid through mortgage financing over up to 30 years. After several years, modernization or renovation measures to the house or condominium may become necessary. In these cases, you can take out a modernization loan. This is an installment loan that, compared to ordinary consumer loans, offers numerous advantages. In the following article we explain the differences to a normal installment loan and to mortgage loans. We also show you exactly how Maxda’s modernization loan, which is also called an owner-occupied loan, works.

What is a modernization loan?

A modernization loan is an ordinary loan that is repaid in monthly installments. As a borrower, you pay the bank a fixed agreed interest rate for taking out the loan. The loan is taken out for modernization and renovation measures on your own property. For example, if you need to renew the roof or the exterior facade, you can conveniently do this with a modernization loan.

This loan can be purpose-bound for modernization or renovation measures on your own property. For this you receive an interest rate that is below the rates for ordinary installment loans. The purpose restriction is therefore a financial advantage for you.

Who can apply for Maxda's modernization loan?

Only a few requirements must be met to apply for the modernization loan. The loan can only be granted to property owners who live in an owner-occupied property. This can be a house or a condominium. In addition, the property must have been owned by the borrower for at least three years.

Further requirements include having sufficient income to repay the requested loan. In other words, your financial creditworthiness must be adequate. The property to be modernized or renovated does not have to be fully paid off. An existing mortgage financing can therefore be in place. This financing generally does not have a negative effect on the requested modernization loan.

What are the advantages and disadvantages of a modernization loan?

Borrowers who take out a modernization loan benefit from numerous advantages. There are also minor disadvantages, which, however, can be neglected. Borrowers generally benefit from the following advantages:

• With a modernization loan, property owners receive favorable loan interest rates.
• No entry in the land register is required to apply for and take out the loan.
• Borrowers benefit from high flexibility thanks to free special repayment options at any time.
• Loan amounts from 5,000.00 EUR to 50,000.00 EUR are possible.
• Medium to long terms from 5 years up to 15 years are selectable.

What else to consider:

• The loan can only be granted to owners of an owner-occupied property.
• Interest rates are somewhat higher compared to ordinary mortgage loans.

Which measures can be financed with a modernization loan?

• Installation of new windows
• Renovation of the bathroom
• Replacement of the heating system
• Roof renovation
• Addition of a conservatory or carport
• many more possibilities

All measures that improve energy efficiency or reduce the water consumption of your property can also be financed within the scope of a modernization loan. If you are unsure whether your planned measures can be financed with a modernization loan, simply contact the service hotline or submit a non-binding loan inquiry.

How do you apply for a modernization loan?

In the first step, you should determine the total costs of the renovation or modernization measure. Record all costs in writing so that you can present them to the bank in a comprehensible way if necessary. Any available equity can be included at this point.

Many consumers believe that they have little or no equity available to invest in the modernization loan. However, many borrowers have a building savings contract (Bausparvertrag) that can be used for modernization. For example, it is possible to split the building savings contract and thus withdraw the paid-in amounts. These can be included in the planned financing so that the required loan amount can be reduced.

Apply for the modernization loan quickly and easily on Maxda.de

More and more people are choosing to apply for loans online. Applying for a loan on the internet is simple, uncomplicated and only takes a few minutes. Just enter your required financing amount and the desired term in the loan calculator. The loan calculator immediately shows you the estimated monthly installment. Afterwards, some personal data and information about your financial situation are required.

In the next step, your information will be checked and processed individually. You will finally receive loan offers that you can examine in detail. Pay attention to free special repayment options and, of course, the interest rate in these offers. When comparing the interest rates of different offers, it is important to use the annual percentage rate (effective interest rate) as a basis for comparison. Only the effective interest rate includes all costs and fees associated with applying for and disbursing the loan.

Comparing effective interest rates is particularly important when taking out a modernization loan and is underestimated by many consumers. If you manage to reduce the interest rate for your modernization loan by just 0.5% through a rate comparison, this will result in significant savings for you. The savings are particularly noticeable if you take out the maximum amount of 50,000.00 EUR. Always bear in mind that the interest rate is the price of the loan.

Submit your loan inquiry now. As part of the loan inquiry, you must submit some documents. This can include the modernization or renovation plan. In addition, the financing bank requires evidence of your professional and financial situation. You will be asked to submit payslips and an employment contract. Once all documents have been submitted and reviewed, the loan agreement can be signed. After signing, the money will be paid into your current account, if you wish. The entire process is quick, simple and unbureaucratic.

Tip: Do you have questions about the individual loan offers or conditions? Do not hesitate to contact Maxda customer service, which will be happy to assist you with questions or problems. We are also happy to help you determine which documents are required for which bank application.

How to choose the right term or installment

Before you take out the modernization loan, you should consider the right or appropriate installment and loan term. If you choose an installment that is too high, you may have repayment problems. If the installment is set too low, it will cost you a lot of money because you will repay the loan over a very long period and interest costs will increase. It is therefore advisable to prepare a household budget. Note your monthly income and expenses and compare them. Subtract all monthly expenses from all regular income. Ideally, a surplus will result that you can use to repay the loan. However, do not plan the entire surplus for the loan installment; leave a buffer for unforeseen events and reserves.

How long does the review or credit decision take?

The review of the loan application by the bank depends on the amount of the loan requested. For smaller loan amounts, the bank's risk is lower. Therefore, the review in this case takes only a few hours or days. If you apply for a modernization loan in the amount of 50,000.00 EUR, a particularly fast credit check can be carried out within a few minutes. Ultimately, the entire duration of loan processing also depends on how quickly you submit or upload all required documents.

The identity check can be carried out via the Postident procedure and the Videoident procedure

Many borrowers consider it important to have access to the loan as quickly as possible. For this reason, many processes have been digitized these days. One of these processes is the identity check. Every bank is obliged to verify the identity of the borrower. As part of the application for a modernization loan, you can verify your identity quickly and easily using the Postident procedure or the Videoident procedure.

How should the modernization loan be secured?

When you take out a modernization loan, the question of appropriate protection almost always arises. However, this is not the protection for the bank, but your protection as a borrower. Consider the possibility that you may become unemployed or even unable to work. In these cases you may no longer be able to repay the loan. Therefore, it may be sensible to take out residual debt insurance. Residual debt insurance for the event of unemployment or incapacity to work is advisable. An existing or new life insurance policy can also be considered to protect you or your family.

Alternatives to the modernization loan

If you cannot or do not want to take out a classic modernization loan, there are numerous alternatives for financing. We present these alternatives below:

The classic installment loan as an alternative to the modernization loan A classic installment loan is a loan that is usually taken out to finance consumer goods or purchases. Interest rates on installment loans are higher than those on mortgage financing and real estate loans. Installment loans can, depending on their amount and the borrower's creditworthiness, be granted unsecured. In principle, it is possible to carry out modernizations or renovations to your own property with an installment loan. However, because the interest rate is very high, ordinary installment loans are rather unsuitable for modernizations or renovations.

Mortgage financing If you want to carry out the planned modernizations or renovations as cheaply as possible in terms of interest, it is possible to take out mortgage financing. In this case, the financing amount is secured by a land charge (mortgage). If free mortgage portions are available in the land register, this approach can be useful. However, mortgage financing often only allows limited special repayment options. The advantage of taking out mortgage financing is that it is not purpose-bound and the loan amount is not limited to a maximum of 50,000.00 EUR.

Take advantage of low-interest loans from the Kreditanstalt für Wiederaufbau (Kfw) The state supports property owners in certain modernization or renovation measures with low-interest loans. Energy-efficient renovations and complete refurbishments in particular are supported. Age-related conversion of a property can also be implemented at low interest within the framework of a Kfw support program.

For example, the Kfw promotes measures to reduce CO2 emissions and energy loss under program 151 "Energy-efficient renovation." Under support program 152, individual measures such as thermal insulation of walls and roofs, renewal or installation of a ventilation system, and optimization of existing heating systems are supported. Therefore, be sure to check the Kfw funding programs before applying for the modernization loan.

Use state funding programs of the federal states for property modernization Ultimately, all federal states offer various funding programs for property modernization. Exactly what is funded is regulated differently in the federal states. Therefore, it is worth checking the specific funding conditions of your federal state.

Tip: If you are planning to modernize your property, combining different modernization financing options can also be sensible. For example, it is possible to combine your state's funding programs with the offerings of the Kreditanstalt für Wiederaufbau and a modernization loan from a bank. In this way you reduce the costs of your project and receive maximum funding.