How Much Can I Borrow?


The guide to the factors that determine your maximum property loan size in Germany. Find out how much you can borrow using our calculator below. We also compiled a list to your most pressing property financing questions.

 

You are about to make one of the biggest financial decisions of your life: buying an apartment or house in Germany. No doubt you’ve got a few questions. What do I need to know about the German mortgage market? How much do I need for a deposit? What is my borrowing power? What are mortgage requirements and how can I apply?

To help ease some of the anxiety that comes with this decision, LoanLink offers comprehensive answers to your most pressing home loan questions. Be sure to use our calculators to compare home loan rates, loan types and other variables.

The concept of “shopping” for a mortgage and remortgaging every few years does not really exist in Germany. If you come from a country that has a more prevalent property ownership culture, keep this important difference in mind. It is highly recommended to shop around to get the best deal and to use a brokerage service to understand exactly what options and types of products are available.

In Germany, the most common mortgage type is the Annuity loan (“Annuitätendarlehen”),  which is a fixed-rate loan. An annuity loan’s monthly rates remain constant over the life of the loan. In the beginning, the interest portion of the installment is high and the repayment portion of the installment is low. As you repay the loan, the interest portion decreases and the loan repayment portion increases.

Generally speaking, a mortgage has a fixed term of 5 to 30 years. However, 10 years is the most common fixed term. You typically repay the loan on a scale from 2-10% per year (known as “Tilgung”). In addition, you typically have the option of paying up to 5% of the loan annually (known as “Sondertilgung).

After the initial mortgage runs out, you likely will need to refinance with another mortgage under new market circumstances. Another option is to secure interest rates at the current level (“Forward Darlehen”) a maximum of 5 years prior to the end of the existing mortgage. Please check here for an exemplary mortgage calculation for an annuity loan.

Foreigners do not have any restrictions in terms of purchasing German real estate. Regardless of whether or not your country of origin is a part of the European Union (EU), the maximum amount that you can borrow depends on your residency status:

  • If you live and work in Germany, you could potentially borrow up to 100% of the property value. However, you will get the best interest rates for 50-60% financing.
  • If you live and work abroad, you may be able to borrow up to 55-60% of the property value.

Germany also requires buyers to pay purchase fees. These are in addition to the property price and you must pay them out of your own pocket. Such fees might include land register fees, notary fees, real estate agent fees and property taxes. In total, they can amount to up to 16% of the property price. To calculate your total purchase costs, please complete the LoanLink questionnaire.

A number of factors help determine your borrowing power (the amount you can borrow). Lenders will look at factors like: your income (and whether you work full time, part-time or occasionally), marital status, the number of dependents (if any), your credit score and expenses.

At this point, you’re no doubt wondering how much you can borrow on your current salary – and whether being self-employed will impact your borrowing power. Please use our borrowing power calculator to get an idea of the factors that impact you personally.

The process of applying for a German mortgage is similar to applying for a mortgage elsewhere. For most clients, the biggest difference is the high level of due diligence that the bank applies to review your financial status. As you may know, German lenders assess not only the property’s value, but also your financial situation.

1. Check if you qualify for a mortgage

First of all, you need to figure out if you qualify for a loan in Germany. You also likely want to understand what your mortgage could look like in general. To get answers, it makes the most sense to turn to a specialized mortgage broker like LoanLink.

Based on our experience with over 400 German banks, we created a survey that will immediately evaluate if you qualify for a loan. We will also tell you how to meet other common requirements for your financing process.

A loan pre-approval sets you up for a smooth home buying experience. A pre-approval doesn’t take much time, since it requires relatively few documents and administrative information. If you’d like to get pre-approved, please complete the LoanLink questionnaire.

2. Self assessment & expert advice

As you get closer to making your property purchase, provide more information on your personal profile, your selected property and your financing preferences. If you have any questions, we are available to help and to guide you through a self-assessment.

After your self-assessment, we will approach various lenders to get the best financing terms based on your profile. Once we have options for you, your dedicated mortgage advisor will schedule a meeting or call. Then, we will discuss all of your options and recommend the most suitable one.

In addition, we will let you know exactly what documents you will need and help clarify any questions.

3. Finalize application

Once you select the best offer, we will help you finalize the application process. Remember: our help is non-binding and free of charge.

3.1. Provide documents

You will need to provide a full set of documentation to verify your financial and personal life. This includes personal and financial documents, such as:

  • Self-evaluation (a questionnaire that you can start right away here)
  • Proof of equity
  • Payslips
  • Income tax certificates
  • Passport copy
  • Residence permit (if available)
  • Letter of Employment from your HR department
  • Annual accounts (if you are self-employed)

Additionally, the lender will need documents about the property, such as:

  • Building description / specification
  • Pictures
  • Floor plan and land register marks
  • Draft of sale contract

We created a holistic mortgage document checklist containing all required documents, where to get them and when.

3.2. Agree on credit report (SCHUFA)

German banks require evidence of a stable banking history. SCHUFA is a German credit data repository that provides consumer credit ratings. Your lender will approach SCHUFA and request a “Bonitätsauskunft.” If you like, you can also check your Bonitätsauskunft yourself and request a copy.

As a foreigner, you may not have any record at the Schufa. In this case, you may need to show proof of your creditworthiness from your home credit reporting agency.

3.3. Open a German bank account

A German checking account is a prerequisite for a mortgage in Germany. In most cases, the home loan lender will provide the account. Otherwise, we can help you set up the checking account.

4. Mortgage approval

We will manage contact with the lender and will provide all necessary documentation for their credit assessment. Throughout the process, we will stay in close communication with the lender on your behalf. After a couple of days, we will receive the final mortgage confirmation by the lender and inform you immediately of the corresponding terms.

5. Personal identification and mortgage closing

The lender will require you to identify yourself in person in one of their branches in Germany. While you are there, you also can use this appointment to sign the financing contract.

By law, there is a 14-day withdrawal period on all financing contracts in Germany, at no cost. You can use this period to finalize the property purchase, which becomes legal once you sign the purchasing contract at a mandatory appointment with a notary.

6. Notary appointment

To make the property purchase official, you must sign a deed of sale in front of a German notary. First, he or she checks the land register to see whether the property can be sold at all. If it can be, the notary sees if there are any restrictions on the property’s use.

A little-known tip is that the buyer may choose his or her own notary. For expatriates, it’s important to choose a notary who speaks English.

Always ask for a copy of the purchase contract before going to the notary. Review it carefully, and even have it translated if necessary. Prepare any questions in advance. Don’t hesitate to ask the notary questions, and allow sufficient time at the appointment so you can get full answers.

Then, the notary reads the contract of sale. The contract spells out the obligations of each party and what measures to take in the event of default. Once all parties sign the contract, the notary registers the change of ownership with the municipal government and enters the property in the land register.

At the signing ceremony, the notary reads the contract of sale verbatim. The notary must be certain that both parties fully understand the contract’s content.

During the reading, the buyer may ask questions and interrupt the proceedings if they don’t completely understand a clause. Since the reading must be in the German language, the buyer has the right to have a professional interpreter present (though this will be an additional cost).

7. Transaction

Once you sign the purchase contract and secure a mortgage, the bank will process the transaction according to the contract’s terms. You can make a transaction in one payment if you are purchasing an already constructed property or in multiple payments if the property is still under construction.

Our LoanLink mortgage advisors are happy to answer any questions. Our goal is to help you find the best mortgage loan. Please reach out via email at [email protected] or by phone (+49) 30-5683-7535.

LoanLink is an independent mortgage broker specialized in finding the most suitable property mortgage for non-German residents. Our algorithm screens mortgage rates of more than 400 banks to find the best deal. Our financial advisors are experienced and will guide you through all necessary steps.