In Brief (TL;DR)
A purchase and renovation mortgage is the solution that allows you to buy and renovate a home with a single loan, simplifying the entire process.
Discover how it works, the benefits, and the requirements to access this financial tool designed for those who want to buy and customize their home with a single repayment plan.
Explore how it works, the costs, and the documents required to make the right choice.
The devil is in the details. 👇 Keep reading to discover the critical steps and practical tips to avoid mistakes.
Buying a home and customizing it to your liking is a fundamental life project for many. Often, however, the ideal property requires modernization. In this scenario, the purchase and renovation mortgage emerges as a smart, integrated financial solution. This product allows you to obtain, with a single application and a single contract, both the liquidity needed to buy the home and the funds to finance the work. It is a concrete response to a widespread need in the Italian market, characterized by a real estate heritage that combines historical value with the need for innovation.
This guide analyzes in detail the operation, advantages, and eligibility requirements for this type of mortgage. The goal is to provide a clear tool for anyone who wants to transform a house in need of renovation into their dream home, managing the entire process with a single financial transaction, thus optimizing time and costs.
What is a Purchase and Renovation Mortgage and How Does It Work
A purchase and renovation mortgage is a loan that combines two purposes into a single product. Instead of taking out two separate contracts—one for the property purchase and another, perhaps a personal loan, for the renovations—the borrower initiates a single banking process. This approach not only simplifies the bureaucracy but also reduces overall costs, requiring only one notarial deed and a single loan application review. The bank evaluates the project as a whole, considering both the current value of the property and its estimated value after the work is completed.
The funds can be disbursed in two main ways. The first is a lump-sum payment at the time of the deed, ideal for minor, pre-quoted renovations. The second, more common for major renovations, is disbursement in multiple draws, based on the progress of the work (known as SAL, *stato di avanzamento dei lavori*). In this case, an initial portion of the sum is paid for the purchase, while subsequent installments are released following appraisals that certify the completion of various construction phases.
The Advantages of an Integrated Financial Solution
Choosing a single mortgage for purchase and renovation offers tangible benefits. The first is management simplification: a single banking contact, a single amortization schedule, and a single monthly payment make financial control easier. This avoids the complexity and duplicate costs associated with managing two separate loans. Another significant benefit is economic. Mortgage interest rates are generally lower than those for personal loans, making financing the renovations more affordable.
Consolidating the transactions also optimizes timelines. Renovation work can begin immediately after the purchase deed is signed, without having to wait for the approval of a second loan. Finally, this solution provides easier access to tax incentives available for home renovations, such as deductions for building restoration and energy efficiency upgrades, integrating them directly into the home purchase project.
The Italian Context: Between Tradition and Innovation
In Italy, buying a home is deeply rooted in Mediterranean culture and represents a family and personal milestone. The country’s housing stock is vast and often dated, with a strong presence of historic buildings or those built decades ago. This creates a market where renovation is not an option but a necessity to bring homes up to modern standards of comfort, safety, and sustainability. Recent data show a contraction in residential building recovery, but the construction sector as a whole maintains substantial stability, also supported by public demand.
The purchase and renovation mortgage perfectly addresses this reality. It allows for the enhancement of existing properties, combining the charm of tradition with the demands of innovation. It is the ideal tool for those who see the potential in a property needing renewal, transforming it into a modern and functional home. Furthermore, with growing attention to sustainability, many financed projects aim to improve the energy class, as required by European directives, turning an old house into an efficient green building.
Requirements and Documents for the Application
To qualify for a purchase and renovation mortgage, the bank evaluates several factors. The personal and income requirements are similar to those for a traditional mortgage: you must demonstrate stable employment and sufficient income to support the monthly payment, which should generally not exceed one-third of your net monthly income. Creditworthiness, meaning no negative credit reports, is another crucial factor.
The documentation to be submitted is more extensive than for a simple purchase mortgage. In addition to personal and income documents (ID card, pay stubs, tax returns), documents related to the property (deed of origin, floor plan) are required, and, most importantly, those related to the renovation. These include a detailed cost estimate from the contractor, the approved building project (such as CILA or SCIA), and the bill of quantities, a technical document detailing the work and materials.
Costs, Interest Rates, and Tax Incentives
The cost of a purchase and renovation mortgage depends on several factors, including interest rates (fixed, variable, or hybrid), the spread applied by the bank, and ancillary costs like application and appraisal fees. The loan amount usually does not exceed 80% of the property’s value after renovations, as determined by the bank’s appraiser. It is crucial to compare different offers to find the most advantageous solution, paying attention not only to the TAN but also to the APR, which includes all financing costs.
A very interesting aspect of this product is the ability to benefit from tax deductions. For renovation expenses, you can take advantage of the Renovation Bonus, which for 2025 allows a 50% IRPEF deduction for primary residences, up to a defined spending cap. The mortgage interest is also partially deductible, with different amount limits for the portion intended for the purchase of a first home and the portion for the renovation. These incentives significantly reduce the overall financial burden of the project.
Conclusion
The purchase and renovation mortgage stands out as a strategic and versatile financial solution, particularly suited to the Italian real estate context. Its ability to unify two complex needs into a single, streamlined process is its main strength, offering tangible savings in time, costs, and bureaucratic stress. It allows you to look beyond a property’s current state to see its potential and transform it into a customized living space that combines tradition with modern comfort.
Tackling a project of this magnitude requires careful planning and a conscious assessment of your financial capabilities. It is essential to prepare complete and accurate documentation, especially regarding the renovation project. Relying on the advice of industry experts and comparing offers from different credit institutions is the best way to secure the most favorable conditions and realize your dream home without any surprises.
Frequently Asked Questions
It’s a single loan that covers both the purchase cost of the property and the expenses for the renovations. The bank evaluates the project as a whole, considering the home’s value after the renovation. The amount for the purchase is paid to the seller at the time of the deed, while the sum for the renovations is disbursed separately, often in multiple installments based on the progress of the work (SAL).
The advantages are significant: you go through a single bank application review and a single notarial deed, reducing costs and time. You manage a single monthly payment, simplifying financial planning. Additionally, you can simultaneously access tax incentives for a first-home purchase and deductions for renovations.
In addition to standard personal and income documents (ID card, pay stubs, CUD/730 tax forms), you need documents related to the property, like the preliminary sales agreement. For the renovation part, it is crucial to provide the bank with a detailed cost estimate from the contractor and, depending on the complexity of the work, the project approved by the municipality (such as SCIA or DIA).
Generally, banks finance up to 80% of the property’s value after the work is completed. However, some solutions can cover up to 100%, such as those for young people under 36 with additional guarantees, although they are less common and require very solid income and creditworthiness.
The disbursement of the renovation funds almost never happens in a single lump sum. The most common method is based on the Progress of Work (Stato Avanzamento Lavori – SAL). The bank releases the funds in several installments after verifying through an appraisal that a specific phase of the work has been completed according to the project. This system protects both the borrower and the bank.
Did you find this article helpful? Is there another topic you'd like to see me cover?
Write it in the comments below! I take inspiration directly from your suggestions.