Renovating can be worth more than moving. We explain how a mortgage-backed loan for works (or an increase to your mortgage) works, with a worked example and the plan to make before you apply.
Renovating can be worth more than moving
Moving home costs IMT, stamp duty, the deed, agent fees and a new mortgage. Renovating the home you already live in avoids almost all of that. A kitchen, a bathroom or new windows change your day to day and often add value to the property.
The common mistake is to start with the loan and only then with the budget. It should be the other way round.
How a mortgage-backed loan for works works
- Increase to your mortgage: you ask the bank that holds your mortgage for more capital, with a new valuation of the home and a new assessment. The rate usually follows the mortgage rate.
- Mortgage-backed loan for renovations: a new loan secured on the home, useful when the home is already paid off or when another partner bank offers better terms. Long term, more paperwork and valuation and registration costs.
Personal loans for renovations, without a mortgage, also exist. The Guru does not arrange them: we only work with mortgage credit.
A worked example
- Over 20 years: about €247 a month, €59,191 in capital and interest.
- Over 15 years: about €300 a month, €53,982 in total. €53 more a month, €5,209 less at the end.
- Add the stamp duty on the loan (0.6%: €240), the valuation and the registrations.
Make the plan before the loan
- Three written quotes, with materials and deadlines.
- A 10 to 15% buffer for surprises. They always show up.
- Permits or prior notice to the council if you touch structure, façade or utilities.
- A payment schedule for the contractor aligned with the loan drawdown.
- Keep the invoices: improvement works with an invoice count towards reducing capital gains if you ever sell.
Works, capital gains and IMI: what changes over time
Improvement works with an invoice (not routine maintenance) are added to the purchase cost when you one day sell the home, and reduce the capital gain subject to income tax. Keep the invoices from the last 12 years, with the property's tax number. The capital gains calculator shows you the effect.
IMI does not change because of the works themselves, but it can change if you request, or there is, a revaluation of the taxable value. If you turn a home with a poor energy rating into class A or B, some municipalities give an IMI reduction: ask your council before deciding.
When it makes sense to use your home to finance the works
It makes sense for larger projects, when you want to spread the instalment over more years and the home has mortgage headroom. Always compare by APRC and total amount payable, and factor in the fixed costs (valuation, registration, 0.6% stamp duty). A longer term lowers the instalment but increases the total interest.
Frequently asked questions
Can I ask for an increase to my mortgage for renovations?
Many banks allow it, with a new valuation and a new assessment. The rate usually follows the mortgage rate, but there are process costs. Also compare with a new loan from another partner bank.
Do renovations lower IMI?
Not directly. They may change the taxable property value if there is a revaluation. What can change is the value of the property and future capital gains, if you keep the invoices.
Does the Guru handle renovation loans?
Yes, when it is mortgage credit: an increase to your mortgage or a mortgage-backed loan for works, through the partner banks and at no cost to you. We do not arrange personal loans.