Finding an affordable loan for renovating a rental apartment: your guide
13/06/2025
5
Minutes
Katrin Straub
Managing Director at nextsure
Would you like to modernise your bathroom or install a new kitchen, but are put off by the costs? A low-cost loan for renovating your rented flat can be the solution. This article shows you the way from the idea to financing.
The topic in brief and concise terms
As a tenant, a written agreement with the landlord is always required for larger renovations in order to be legally protected.
An instalment loan for any purpose is the best option for tenants, as no land registry entry is required.
Always compare the APR, the term and the option of making free extra repayments to find the most favourable loan.
Legal basics: What tenants need to know before renovation
Before you take out a loan, the landlord’s consent is crucial. For major alterations that affect the building fabric, you need written permission. Without this agreement, you risk having to reverse all changes at your own expense when you move out. An agreement on modernisation under Section 555f of the German Civil Code (BGB) creates legal certainty for both parties and should regulate details such as the scope and any compensation payments. Even a simple written consent can be legally binding and protect you. So clarify all details before a single euro is invested. That way, you can ensure that your investment in the flat improves not only your quality of living, but also the tenancy relationship.
Financing options under review: Identifying the right loan
To find an affordable loan for renovating a rental flat, an instalment loan for any purpose is the most common option. Unlike property loans for owner-occupiers, no land register entry is required here, which simplifies the process for tenants. According to the German Bundesbank, the interest rates for such consumer loans have averaged around seven per cent in recent years. It is worth making a careful comparison, as even a one percentage point difference can amount to several hundred euros over the term. When making your choice, look out for the following criteria:
Effective annual interest rate: the most meaningful figure for the total cost.
Term: affects the monthly instalment and interest costs.
Free special repayments: allow faster repayment without additional costs.
Option of instalment breaks: offers flexibility when cash is tight.
A loan for any purpose offers you the flexibility you need for your project. With these criteria in mind, you can search specifically for the best offer.
The application process: In four steps to successful financing
A well-prepared application increases your chances of a quick approval and favourable terms. Banks primarily assess your creditworthiness (credit rating) and require the relevant supporting documents. A stable income is the most important prerequisite. For loan amounts from EUR 15,000, many institutions require detailed bank statements for the past three months. Approach the process systematically:
Determine your needs and budget: Calculate the renovation costs precisely and set the loan amount.
Prepare a household budget: Compare your monthly income and expenditure. A correct household budget is the basis of every loan enquiry.
Compile the documents: Have your ID card, payslips and the modernisation agreement with your landlord ready.
Request terms: Obtain several non-binding offers to compare the interest rates.
This structured approach will prepare you ideally for your meeting with the bank.
Special case of energy-efficient renovation: make use of government funding
If you are planning energy-saving measures, such as new windows or insulation, government grants come into play. The Kreditanstalt für Wiederaufbau (KfW) offers low-interest loans and grants, which can also be relevant for tenants. The prerequisite is that the landlord agrees to the measures and supports the application, as grants are usually tied to the owner. Thanks to KfW funding, the amount of credit required can be reduced by up to 20 per cent. Actively raise this with your landlord, as an energy-efficient refurbishment also increases the value of their property. Our expert tip: review the KfW and BAFA programmes together with your landlord to make full use of the potential. A modernisation loan without an entry in the land register can often be combined well with these grants.
Calculating costs realistically: practical examples for bathrooms and kitchens
The cost of a renovation varies greatly depending on the scope and choice of materials. A bathroom renovation of ten square metres can cost between €5,000 and €15,000. For a new fitted kitchen, you should expect to pay at least €4,000 to €12,000. Let’s assume you need €10,000 for your new bathroom. At an interest rate of five per cent and a term of 72 months, this results in a monthly instalment of around €161. Careful planning protects you from additional financing and financial bottlenecks. Always obtain at least two or three quotes from tradespeople so you can compare prices more easily. Financing for the renovation of your bathroom and kitchen should always be based on a solid calculation.
Optimise term and rate: Finding the right balance for your budget
The loan term has a direct impact on your monthly repayments. A longer term does reduce the instalment, but increases the overall cost through more interest payments. A loan of €20,000 over seven years costs around €40 less per month than the same loan over six years, but the interest costs rise by about €840. Choose an instalment that you can comfortably afford even if unexpected expenses arise. Look out for the option of free unscheduled repayments so you can pay off the loan faster and save on interest when your finances allow. Many long-term loans offer this option. A well-considered financing structure is the final building block for your successful renovation project.
Careful planning is the key to finding an affordable loan for renovating your rented apartment. At nextsure, we help you find the right cover for your plans. Have your insurance situation checked free of charge and receive concrete suggestions for improvement.
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FAQ
Which renovations am I allowed to carry out as a tenant without consent?
You may carry out minor cosmetic repairs such as painting the walls in neutral colours, wallpapering or filling drill holes without consent. All measures that affect the building fabric (e.g. changing tiles, removing walls, replacing sanitary facilities) require the landlord’s permission.
How do I find the cheapest renovation loan?
The best way is to use an online loan comparison. Use portals to compare the terms and conditions (effective annual interest rate, term, special repayment options) offered by different banks without obligation. A good credit rating and a second borrower can further reduce the interest rate.
Can I also get KfW funding for energy-efficient refurbishment as a tenant?
Tenants generally 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 lower energy costs and an increase in value.
What is a modernisation agreement?
A modernisation agreement is a written contract between tenant and landlord. It sets out the exact scope of the alterations planned by the tenant, who bears the costs, and what happens to the investments when the tenant moves out (e.g. an obligation to reinstate the original condition or a compensation payment).
Does a credit application affect my SCHUFA score?
A pure 'credit conditions enquiry' is SCHUFA-neutral and has no impact on your score. Only a binding 'credit enquiry' is recorded with SCHUFA. When using comparison portals, make sure that only one conditions enquiry is submitted.
What term should I choose for my renovation loan?
Choose a term that results in a monthly instalment you can comfortably manage. A shorter term means higher instalments, but lower overall costs. A longer term reduces the instalment, but makes the loan more expensive overall. A good compromise is often between 48 and 72 months.
