Financing energy-efficient refurbishment: How to secure a modernisation loan without a land registry entry
12/07/2025
11
Minutes
Katrin Straub
Managing Director at nextsure
Rising energy costs and new legal requirements are putting many property owners under pressure. A modernisation loan for energy-efficient refurbishment without an entry in the land register offers a quick and straightforward financing solution. Find out how you can obtain up to €80,000 for your project and save notary fees of up to two per cent of the loan amount.
The topic in brief and concise terms
A modernisation loan without a land register entry is a quick and straightforward alternative to traditional construction financing for amounts up to €80,000.
By dispensing with the notary and land registry office, you can save up to two per cent of the loan amount in ancillary costs.
Combine the loan with KfW or BAFA grants to reduce your financial burden by up to 70 per cent.
Key insights at a glance
For a quick overview, we have summarised the key points for you:
No notary fees: A modernisation loan without an entry in the land register saves you up to two per cent of the loan amount in notary and land registry fees.
Rapid availability: Processing is often possible within a few days, as the bureaucratic effort is eliminated.
Flexible amounts: Banks typically grant such loans for amounts between €5,000 and €80,000.
Cheaper than instalment loans: Interest rates are usually one to two percentage points below those for loans for unrestricted use.
Grants can be combined: You can use the loan to finance your own contribution after deducting BAFA or KfW grants.
The pressure to act: Why an energy-efficient renovation is now unavoidable
The Buildings Energy Act (GEG) obliges owners, when renovating or buying older properties, to meet certain energy standards. A new heating system, for example, can cost around EUR 15,000, while replacing windows can quickly cost EUR 20,000. External wall insulation can reduce energy costs by up to 40 per cent, but requires an investment often exceeding EUR 25,000. Many owners underestimate that even replacing an old heating system may be required by law. These costs represent a significant financial burden for most households, one that is hardly manageable without suitable financing. Thoughtful financing is therefore the first step towards a successful renovation. Find out early about a financing for façade insulation.
This starting point calls for action and brings flexible financing models into focus.
The solution: How the modernisation loan works without a land register entry
A modernisation loan without land registry entry is a purpose-bound instalment loan for value-enhancing measures on a property. Unlike a conventional property finance loan, it is not the property itself that serves as security, but your creditworthiness. This eliminates the costly and time-consuming process of creating a land charge before a notary, saving you up to €1,000 in fees on a sum of €50,000. Banks offer these loans up to an amount of €80,000 and with terms of up to 15 years. The decisive advantage lies in the fast and straightforward processing. Typical uses are:
Installation of a heat pump or pellet heating system
Insulation of the roof or external walls
Replacement of old windows and doors
Installation of a photovoltaic system
Barrier-free bathroom remodelling
This flexibility makes it ideal for planned refurbishments, but it is not the best choice for every purpose. For smaller purchases, a loan for unrestricted use may be more suitable.
But what requirements do you need to meet to submit a successful application?
Your path to a loan: requirements and the right application process
For approval of a renovation loan, banks mainly check two criteria: you must be the owner of the property and be able to demonstrate sufficient creditworthiness. A stable income and a positive credit record with Schufa are crucial here and can improve the interest rate by more than one percentage point. In addition, most institutions require proof of the intended use, for example through quotes from tradespeople. Keep all invoices carefully, as these often have to be submitted later. The process itself is straightforward and usually consists of four steps: obtaining quotes, comparing loan terms, completing the digital application process and, after approval, receiving the disbursement. Good preparation can shorten the entire process to under a week. Always keep an eye on current building interest rate trends.
With the right documents in hand, it's time to compare the specific costs and interest rates.
Costs and interest compared: When waiving the land charge pays off
Interest rates for a renovation loan without an entry in the land register currently range between 3.5 and 6.5 per cent. They are therefore more expensive than a first-charge mortgage loan (approx. 3.5 per cent), but significantly cheaper than a personal loan for unrestricted use (often over 6.0 per cent). For a loan amount of 40,000 euros and a term of ten years, an interest rate of 4.5 per cent instead of 6.5 per cent means savings of over 4,500 euros in interest costs. Waiving the entry in the land register is particularly worthwhile for amounts up to around 80,000 euros. Although the interest rate here is about one percentage point higher than for a conventional mortgage loan, you save the notary and land register costs of up to 1,600 euros. This saving fully offsets the interest surcharge for shorter terms. For comprehensive planning, you should calculate a low-cost mortgage loan online.
To reduce the costs further, you should factor in government subsidies in your planning.
Expert knowledge: How to combine the loan with government funding
The Federal Funding for Efficient Buildings (BEG) offers attractive grants that significantly reduce your financing burden. The Federal Office for Economic Affairs and Export Control (BAFA) grants subsidies of up to 20 per cent of eligible costs for individual measures such as replacing windows. For replacing a heating system, subsidies of up to 70 per cent are even possible via Kreditanstalt für Wiederaufbau (KfW), but with a maximum of EUR 21,000. You can ideally finance the remaining amount with a modernisation loan. Our expert tip: always apply for the funding before awarding the contract to tradespeople. Retroactive approval is excluded in most programmes. KfW also offers the supplementary loan 358/359, which is specifically intended to finance the remaining costs after the grant has been awarded. This also allows a solar loan for a photovoltaic system to be ideally supplemented.
With the right combination of loan and funding, typical mistakes can be avoided.
A common mistake is to budget too tightly for renovation costs. Always plan a buffer of at least ten to 15 per cent for unforeseen expenses. Another pitfall is choosing the wrong type of loan. A purpose-bound home improvement loan is almost always the better choice than a flexible but more expensive personal loan. Also pay attention to the contract details: free special repayments are an important advantage. Many banks allow annual special repayments of up to ten per cent of the loan amount. Check carefully whether the loan is tied to the purchase of additional products, such as payment protection insurance. This can significantly drive up the total cost. Forward planning, as with a building savings contract for future renovations, protects you from costly surprises.
Request an individual risk analysis now: have your insurance situation reviewed free of charge and receive specific suggestions for improvement.
More useful links
KfW offers comprehensive information on energy-efficient renovation of existing properties for private individuals.
You can find an overview of the funding products for energy-efficient renovation of existing properties at KfW.
KfW provides detailed information on KfW loan 261/262 for the Federal Funding for Efficient Buildings (residential buildings).
The Federal Ministry for Economic Affairs answers frequently asked questions about tax incentives for building renovation.
The Federal Ministry of Finance provides information on tax incentives for energy-efficient building renovations.
On energiewechsel.de, a portal of the Federal Ministry for Economic Affairs and Climate Action, you will find information on tax incentives for energy-efficient building renovation.
Use the KfW renovation calculator for private individuals with existing properties to plan your renovation.
FAQ
What documents do I need for the application?
As a rule, you will need the last three payslips, your bank statements, a copy of your identity card and a recent land registry extract as proof of ownership. In addition, you should submit estimates for the planned measures.
What happens if I can no longer make the loan repayments?
As no land charge has been registered, the bank cannot force the property to be auctioned. However, as with any other instalment loan, it will try to recover the outstanding claims through dunning proceedings and, if necessary, wage garnishment.
Can I also apply for the loan as a tenant?
No, a home improvement loan is linked to property ownership. Tenants can instead use standard instalment loans for unrestricted use.
Are special repayments worthwhile on a home improvement loan?
Yes, if the contract allows free special repayments, you should make use of them. Each additional repayment reduces the outstanding balance, shortens the term and lowers the total interest costs. Many banks allow this up to a certain amount per year.
Is the interest rate fixed for the entire term?
Yes, with a modernisation loan in the form of an instalment loan, a fixed interest rate is generally agreed for the entire term. This gives you maximum planning security, as the monthly instalment remains constant.
Can I claim tradesperson services as a tax deduction, even if I use a loan?
Yes, you can claim up to 20 per cent of the pure labour costs on tradesperson invoices (maximum EUR 1,200 per year) for tax purposes. The financing method does not matter. For energy-efficient renovations, there are even higher tax deduction options.
