Mortgaging an existing property to renovate

Cases from this theme — by region

Mallorca: Tenerife: Gran Canaria: Canary Islands: Costa Blanca: Costa del Sol: Costa de Valencia: Costa Brava: Algarve: Madeira: Mainland Portugal: Anonymised individual case, not a binding statement for other projects · Siegfried Perini for the owner Olga Nikushkina · §34i GewO · no tax or legal advice · no financing commitment; conditions depend on creditworthiness, loan-to-value and bank

In short: All works costed before the purchase: Through whole-project planning: all measures costed before the purchase, funds secured from the outset — from equity or by raising capital against a property at home.

The initial consultation is free and without obligation: The initial consultation is free and without obligation and shows what is feasible in your situation in Spain or Portugal.

Can I finance the purchase and the renovation together in Spain? Not through the Spanish bank — as a rule it does not co-finance the renovation. The Spanish mortgage is calculated on the lower of purchase price and tasación, customarily up to around 70 per cent for non-residents; the value after the works plays no role for the loan-to-value.

Purchase and renovation therefore belong in one overall plan: the works are costed before the purchase, and the funds come from equity or from raising capital against a property you already own in Germany — up to 80 per cent of the lending value, unencumbered or, with very good creditworthiness, as a second charge.

Anyone who raises the renovation only after the notary appointment ends up seeking top-up finance on worse terms, or paying from their own funds. The practical order is: obtain quotations, put a figure on the works, arrange the overall financing, then buy. The cases here show how widely the renovation share can vary when it is planned in from the start.

Renovation in the overall plan — from practice: Anyone who plans the renovation in from the start avoids later financing gaps. The following case reports show, in anonymised form, how purchase price, acquisition costs and planned measures were planned and covered together from the outset in Spain and Portugal.

Why Spain works differently from Germany here: In Germany, modernisation costs are routinely co-financed. In Spain, as a rule, they are not: the bank lends against the purchase price or the valuation — whichever is lower — and the valuation reflects the condition today, not the value after the works. Combined "purchase plus renovation" products in the Spanish market are aimed at residents with their main home in Spain and are no answer for non-residents.

What works in practice is planning the whole project: all measures are costed before the notary date, the mortgage is calculated on the purchase price, and the funds for the renovation are secured from the outset — from equity or, where available, by raising capital against a property at home.

Renovation co-financed — six model cases with additional security: The cases further down are real, anonymised reports; in those the renovation was paid from equity. The six below are calculated model cases — they show what additional security carries, and they differ in size on purpose, because a finca on Mallorca works with different sums than a house near Braga.

The arithmetic is always the same: the Spanish or Portuguese bank lends up to 70 % of the purchase price and values the property as it stands today. An unencumbered property in Germany is mortgaged up to 80 % of its valuation; that second loan covers the renovation and the equity share of the purchase. Purchase costs remain own funds in every case.

Mallorca — finca near Santanyí — Purchase price: 950,000 €; Renovation: 238,000 € (25 %); Purchase loan 70 %: 665,000 €; Loan against the additional security: 523,000 €; Valuation it needs to carry: 654,000 €; Purchase costs from own funds: 105,000 €. Costa del Sol — villa in Marbella — Purchase price: 780,000 €; Renovation: 156,000 € (20 %); Purchase loan 70 %: 546,000 €; Loan against the additional security: 390,000 €; Valuation it needs to carry: 488,000 €; Purchase costs from own funds: 86,000 €.

Algarve — townhouse in Lagos — Purchase price: 520,000 €; Renovation: 156,000 € (30 %); Purchase loan 70 %: 364,000 €; Loan against the additional security: 312,000 €; Valuation it needs to carry: 390,000 €; Purchase costs from own funds: 52,000 €. Costa Blanca — house in Jávea — Purchase price: 420,000 €; Renovation: 105,000 € (25 %); Purchase loan 70 %: 294,000 €; Loan against the additional security: 231,000 €; Valuation it needs to carry: 289,000 €; Purchase costs from own funds: 46,000 €.

Canary Islands — apartment on Tenerife — Purchase price: 340,000 €; Renovation: 68,000 € (20 %); Purchase loan 70 %: 238,000 €; Loan against the additional security: 170,000 €; Valuation it needs to carry: 213,000 €; Purchase costs from own funds: 37,000 €. Mainland Portugal — house near Braga — Purchase price: 260,000 €; Renovation: 78,000 € (30 %); Purchase loan 70 %: 182,000 €; Loan against the additional security: 156,000 €; Valuation it needs to carry: 195,000 €; Purchase costs from own funds: 26,000 €.

Calculated model cases, not documented individual cases and not a financing commitment. Amounts rounded, no interest rate stated. Whether a bank takes this route is decided by its credit policy — creditworthiness, the property and the location of the additional security. Brokerage under § 34i GewO by Olga Nikushkina · no legal or tax advice.

There is a floor: the loan against the additional security starts at around €150,000. Anyone looking to finance only €40,000 of works will not get there this way — for them the renovation stays in the whole-project plan, paid from equity.

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