Finding an affordable loan for renovating a rental apartment: Your guide
13 Jun 2025
7
Minutes
Katrin Straub
CEO at nextsure
Would you like to modernise your bathroom or install a new kitchen, but are put off by the costs? An affordable loan for renovating your rental flat could be the solution. This article guides you from the idea to financing.
The topic in brief and concise terms
As a tenant, a written agreement with the landlord is always necessary for major renovations to ensure legal protection.
A personal loan with no restrictions on use is the best option for tenants, as no land registry entry is required.
Always compare the annual percentage rate, the term, and the possibility of making special repayments free of charge to find the cheapest loan.
Legal Foundations: What Renters Need to Know Before Renovating
Before taking out a loan, the landlord's consent is crucial. For major renovations that interfere with the building structure, you need written permission. Without this agreement, you risk having to revert all changes at your own expense when moving out. A modernization agreement according to § 555f BGB provides legal security for both parties and should cover details such as scope and any compensation payments. Even a simple written consent can be legally binding and protect you. Therefore, clarify all details before investing a single euro. This way, you ensure that your investment in the property not only enhances living quality but also improves the tenancy relationship.
Financing options in review: Identifying the right loan
To find a cheap loan for renovating a rental apartment, a personal loan with no specified use is the most common option. Unlike property loans for owners, no land register entry is necessary here, making the process easier for tenants. According to the Deutsche Bundesbank, the interest rates for such consumer loans have averaged around seven percent in recent years. A thorough comparison is worthwhile, as even a one percent difference can amount to several hundred euros over the term. Consider the following criteria when selecting:
Effective annual interest rate: the most indicative value for total costs.
Term: influences the monthly repayment and interest costs.
Free special repayments: enable faster repayment without additional costs.
Possibility of instalment breaks: offers flexibility in financial bottlenecks.
A loan with no specified use offers you the necessary flexibility for your project. With these criteria in mind, you can specifically look for the best offer.
The Application Process: Four Steps to Successful Financing
A well-prepared application increases your chances of a quick approval and favourable terms. Banks mainly assess your creditworthiness (credit score) and require appropriate evidence. A stable income is the most crucial prerequisite. For loan amounts starting at 15,000 euros, many institutions demand detailed bank statements from the past three months. Approach the process systematically:
Determine need and budget: Accurately calculate renovation costs and set the loan amount.
Create a household budget: Compare your monthly income and expenses. A correct household budget is the foundation of every loan application.
Compile documents: Have your ID card, income statements, and the modernisation agreement with the landlord ready.
Submit condition inquiries: Obtain several non-binding offers to compare interest rates.
This structured approach prepares you optimally for the bank meeting.
Special case in energy renovation: Utilize government subsidies
Planning measures to save energy, such as new windows or insulation, brings government subsidies into play. The Kreditanstalt für Wiederaufbau (KfW) offers low-interest loans and grants, which can be relevant for tenants as well. The prerequisite is that the landlord agrees to the measures and supports the application, as subsidies are usually linked to the property owner. The KfW subsidy can reduce the required loan amount by up to 20 percent. Proactively discuss this with your landlord, as energy-efficient renovations can also increase the value of their property. Our expert tip: Review the KfW and BAFA programmes with your landlord to fully exploit their potential. A modernisation loan without a land register entry can often be easily combined with these subsidies.
Cost estimation made realistic: Practical examples for bathroom and kitchen
The costs for a renovation vary greatly depending on the scope and choice of materials. A bathroom renovation on ten square metres can cost between 5,000 and 15,000 euros. For a new fitted kitchen, you should expect at least 4,000 to 12,000 euros. Let's assume you need 10,000 euros for your new bathroom. At an interest rate of five percent and a term of 72 months, this results in a monthly instalment of approximately 161 euros. Careful planning protects you from needing additional financing and financial shortfalls. Always obtain at least two to three quotes from craftsmen to better compare prices. The financing for the renovation of bathroom and kitchen should always be based on a solid calculation.
Optimise term and rate: Find the right balance for your budget
The loan term directly affects your monthly payments. While a longer term reduces the instalment, it increases the total cost due to more interest payments. A loan of 20,000 euros costs around 40 euros less per month over seven years than over six, but the interest costs increase by about 840 euros. Choose a repayment amount that you can comfortably manage even with unforeseen expenses. Pay attention to the option of making free extra repayments, allowing you to pay off the loan faster and save on interest if you have financial flexibility. Many loans with long terms offer this option. A well-thought-out financing structure is the final building block for your successful renovation project.
Request a personalised risk analysis now
Careful planning is key to finding an affordable loan for the renovation of your rental apartment. At nextsure, we support you in finding the right cover for your projects. Have your insurance situation checked free of charge and receive specific suggestions for optimisation.
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FAQ
What renovations am I allowed to carry out as a tenant without consent?
Minor cosmetic repairs such as painting the walls in neutral colours, wallpapering, or filling in drill holes can be carried out without approval. Any measures that affect the building's structure (e.g. changing tiles, removing walls, replacing sanitary installations) require the landlord's permission.
How do I find the cheapest renovation loan?
The best way is an online loan comparison. Use portals to compare the terms (APR, duration, special repayment options) from different banks without obligation. A good credit rating and a second borrower can further reduce the interest rates.
Can I, as a tenant, also receive KfW funding for energy-efficient refurbishment?
Tenants usually cannot apply for the funding directly, as it is tied to the property owner. However, you can persuade your landlord to carry out the measures and apply for the funding. Both sides benefit from this through lower energy costs and an increase in value.
What is a modernization agreement?
A modernisation agreement is a written contract between tenant and landlord. It specifies the exact scope of the renovations planned by the tenant, the cost-bearing arrangements, and what happens to the investments when vacating the property (e.g., obligation to restore or compensation payment).
Does a credit inquiry affect my SCHUFA score?
A simple 'enquiry about credit terms' is neutral with SCHUFA and does not affect your score. Only a binding 'credit application' is recorded with SCHUFA. When using comparison portals, make sure that only a terms enquiry is made.
What term should I choose for my renovation loan?
Choose a term that leads to a monthly rate that is easily manageable for you. A shorter term means higher rates but lower overall costs. A longer term reduces the rate but makes the loan more expensive overall. A good compromise often lies between 48 and 72 months.
