Mortgage Calculator: An Example for a non-German Resident

Germany is an unusual country when it comes to home financing, as German banks ask for an in-depth analysis from both the seller and new property owner. The banks also require certain documents on your personal and financial situation (please see the list of required documents here). Often times, different banks also require different documents from mortgage applicants. To find out how much you can borrow, you can also use the LoanLink’s borrowing power calculator.

The most common type of mortgage (Baufinanzierung) in Germany is the annuity loan (Annuitättendarlehn). With this type of home loan, mortgage rates stay constant over the life of the home loan, and you are responsible for repaying the value of the loan with the accumulated interest rate. In the beginning, the interest portion of the installment is high and the principal repayment portion of the installment is low. As time goes by, the interest payment decreases and the principal repayment increases. In most cases, the loan has a fixed interest rate for 5 to 30 years. At the end of the fixed term, you need to refinance with a new mortgage at new market rates.

In this article, you will find a sample annuity mortgage calculation for a non-German resident who decided to partially finance his property with a mortgage in Germany.

Using a mortgage calculator, John learns that his personal background, income and job situation allow him to qualify for up to 60% of financing. (Note: the actual percentage of financing available varies case-by-case. In some cases, 60%-80% financing is possible in Germany.) The mortgage calculation breaks down into three separate sections: (1) calculation of the financing need, (2) detailed breakdown of the costs and term of mortgage, and (3) an amortization table of future monthly rates.

How is monthly repayment calculated?

Unscheduled payments

The main benefit of making unscheduled payments (Sondertilgungsmöglichkeiten) is that it allows you to pay off your mortgage faster. At the same time, the interest on your remaining debt also declines. The possibility of the amount and frequency of voluntary repayment are specified in the loan agreement.

John can make an unscheduled repayment to the loan of up to 5% every year. If he doesn’t make any unscheduled payments, after 10 years his paid debt will amount to 95,423 € and the remaining debt at the end of the term will be 164,577€. And it would take 25 years and 5 months to completely pay off the mortgage.

But if John decides to make an unscheduled payment of 5,000€ every year, after 10 years, his paid debt will amount to 147,625 € and the remaining debt at the end of the term will be 112,375€. And it would take 17 years and 2 months to completely pay off the mortgage.

Amortization refers to the gradual reduction of mortgage over a given time period until you fully repay your mortgage. An amortization table shows the breakdown of monthly interest and principal repayment and the home loan balance over the course of the mortgage. The monthly rate remains constant over the course of the home loan. At the same time, the interest portion decreases and the principal payment increases.

To better understand the mortgage amortization, please look at the table below. The table illustrates the monthly and yearly payments until the end of the fixed payment period.

At the end of the period, John has a remaining debt of 164,577 €. He can either fully repay the remainder of debt after 10 years (October 2028) or he must refinance with a new mortgage at a new market mortgage rate.