Modernization projects: How to finance the optimization of your property | Dr. Small

Modernization projects: How to finance the optimization of your property | Dr. Small

According to a report from www.faz.net, many people dream of having their own four walls. The low interest rates of recent years have made it possible for many people to make this dream come true. But buying a property is not the only financial burden that the owners face. At some point, maintenance, renovation or modernization work must be carried out to maintain or increase the value of the property. A survey by the financial service provider Dr. Klein among over 1,000 homeowners in Germany revealed that modernizing the interior, installing a photovoltaic system and optimizing the heating system are seen as important measures to reduce energy costs in the long term. Almost all respondents plan to finance these projects with a loan. However, compared to times of low interest rates, the interest rates on real estate loans have risen significantly. According to data from the financial service provider FMH, they are currently at an average of 4.24 percent, while it was less than 1 percent during the low interest rate phase. In addition, high inflation puts a strain on household budgets as it makes materials and craftsmen more expensive. The survey also revealed that owners would like to modernize various areas of their property, such as the interior, the photovoltaic system, the bathroom, the heating system or the windows. The issue of heating and government subsidies in particular play a role in the decision to modernize. Almost two thirds of those surveyed said they would like to save energy costs in the long term, while only half cited climate protection as the reason. The effort, duration of construction work, costs and changes in political guidelines were cited as barriers to modernization. Most respondents expect costs of up to 50,000 euros and plan to take out a loan for this. There are various financing options, such as a classic installment loan, earmarked modernization loans or classic construction financing. Few respondents have enough of their own funds for modernization.
Source: www.faz.net

The rising interest rates and costs for materials and craftsmen are having an impact on the real estate market. The higher interest rates make it more difficult for owners who plan to modernize their property to find a cheap loan. This could result in fewer people being willing to invest in modernizing their property, which could reduce the value of the property in the long term. In addition, higher costs for materials and craftsmen could cause owners to postpone or limit planned modernization. This could in turn have an impact on the construction and craft industries, as fewer orders and sales are generated. However, government subsidies in the area of ​​energy transition could help owners modernize their properties despite the higher costs and interest rates in order to reduce energy costs and protect the climate. In addition, increased inflation could motivate people to pay more attention to their spending and look for ways to save more. This could make modernization measures that lead to long-term cost savings seem more financially worthwhile. Overall, it can be assumed that rising costs and interest rates will impact the real estate market and the construction and craft industries, although it is difficult to make concrete forecasts.