Including renovation costs in your mortgage

Addtional mortgage for renovation

Renovating an existing home often increases its value, especially when you opt for an extension, dormer window, or a new kitchen or bathroom. In an appraisal report, you can record what the value of the property will be after the planned renovation. Based on this, you can secure a higher mortgage amount than without the renovation. Let’s be honest: buying a fixer-upper becomes a lot more appealing if you can finance the renovation through your mortgage!

Can you finance any renovation?

After a renovation, the value of the property usually doesn’t increase by the exact amount of the renovation costs. The type of renovation, therefore, influences how much Addtional money you can borrow. Is the renovation value-retaining? Then you can fully finance the costs through your mortgage. Consider financing a dormer window or an extension.

However, there are also non-value-retaining renovations. These don’t necessarily hold their value, often because they are highly taste-dependent. What you see as a design upgrade for the kitchen or bathroom might not be seen the same way by a future buyer. That’s why non-value-retaining renovations are only partially financed through your mortgage. The remaining amount must be paid with your own funds.

Example calculation

You buy a house for €350,000 and plan to renovate for €50,000. After the renovation, the property's value is expected to be €380,000. You can then get a mortgage for €380,000, paying €20,000 from your own savings.

construction fund: how it works

You can finance a renovation through your mortgage using a construction fund. This deposit is used to pay for the renovation or refurbishment of the house you purchased. Opting for a new-build home? Then the construction fund can also cover the cost of the land and the different building phases.

This is how it works: the portion of your mortgage intended for the renovation is reserved by the bank in a construction fund. The contractor's invoices for the renovation can be submitted to your mortgage provider, who then pays them from the construction fund.

Any money left in the construction fund at the end of the renovation is used to repay part of your mortgage.

How does interest on the construction fund work?

There is no difference between the mortgage interest you pay on your mortgage and the interest you pay on the construction fund. While it is a separate amount meant for financing the renovation, it still falls under the total mortgage amount. This means you can also claim mortgage interest tax relief on the Addtional mortgage for the renovation.

However, you also earn interest on the outstanding balance in the construction fund: deposit interest. Most mortgage providers automatically offset this interest against the amount you owe that month.

NHG limit 2025: €450,000

Would you like the security of a mortgage and construction fund with NHG (National Mortgage Guarantee)? The purchase price, including renovation costs, can be a maximum of €450,000 in 2025, as you can borrow up to 100% of the market value. To determine the value before and after the renovation, you’ll need an appraisal report. Any amount above €450,000 must be financed with your own funds. Applying energy-saving measures? Then the maximum mortgage with NHG increases to €471,000. Of course, whether you can borrow these amounts depends on your income.

Want to finance a renovation through your mortgage?

The options differ per mortgage provider. Our mortgage advisors are happy to explain the possibilities.