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Old 27.07.2014, 11:20
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Can mortgage include renovation cost?

Another question: if you apply for a mortgage for a property, say 900.000 CHF and you estimate there's 150.000 CHF renovation cost, can you apply for these costs with the mortgage? Is the 20-25% deposit then of the total value including these renovation cost or of the asked property price of 900.000 CHF?

Cheers for any help/explanation on this.
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Old 27.07.2014, 12:09
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Re: Can mortgage include renovation cost?

You can include renovation costs but the bank would have to agree that the proposed costs are in line with their assessment of the value of the property.

If the bank assesses the property value as 1mio, the renovation costs plus the sales price had better not be more than 1 mio.

The problem many are running into now is that with property prices so inflated, adding in the cost to renovate often exceeds assessed value.

Another issue is buyer's financial stability. If one wants to add renovation costs into the mortgage because it is, for instance, tax efficient to do so, the bank will likely look on that more favorably than the case where the buyer simply does not have the funds upfront to cover the renovation costs.

Discuss this with your banker. A rough estimate of the renovation costs is usually sufficient at this stage.

(For your own planning purposes, though, be aware of the tendency for renovation costs to spiral once the project is underway.... But that's another thread. )

The amount you are required to put down is generally based on the total loan you take out. So in your example, you would be required to put down 20 percent of 1,050,000.

(Since you mentioned putting down more than 20 percent... Do be aware that if you can put down 34 percent you will not be required to take out the second mortgage. As the second is always at a higher rate, this might represent a sizeable savings.)
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Old 27.07.2014, 12:12
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Re: Can mortgage include renovation cost?

Yes, we did it it helped that the bank we used (local bank) knew the house they setup a renovation account and we paid the bills via that. We had to use 'proper' companies and supply proper invoices but it was all straight forward.
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Old 27.07.2014, 12:14
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Re: Can mortgage include renovation cost?

You can, but only if the bank think it will increase value of property way beyond the cost itself- eg they could get their money if ever they needed to.
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