To find which mortgage is right for you and also a realistic option, there are two important factors to consider. Your current household income and your available equity/down payment available to inject into the planned property purchase. Household income refers to the sum of income that all people are contributing to a joint household (e.g. spouse, life partner, family member). Equity does not only refer to cash alone and may also include equity held in stocks, bonds, commodities, crypto or other assets.

Interest rate improvements happen in steps. This means that a higher amount of equity allocated towards a financing changes the risk profile for the lender and can therefore make a significant difference in available interest rate conditions. Finding the right savings amount that fits your overall abilities and preferences will require to match the available assets on the borrower’s side to the prevalent requirements and conditions for a financing from a pool of lenders. 

A good start is to first assess what mortgage you can afford based on your current income and savings. With these two inputs, your mortgage can be calculated and your property budget can be realistically defined. Knowing your budget before you start your property search will save  time as you will be able to make a realistic offer in a competitive market and you will not have a mortgage that is too high of a burden for your financial health. During your property search, you will have to then review financing offers, evaluate the property in terms of existing risks and finalize with a notary.

Your financing advisor is also your sparring partner along your real estate buying process. You should coordinate together early on, ideally before you begin your property search, so your financing needs and property budget can be determined. The service of creating your ideal financing concept, providing you with financing offers, filing the mortgage application and finalizing the mortgage comes at no cost to you, because the mortgage broker assumes a high amount of work from the lender, so the bank only focuses on providing the loan product without advisory services. To get a free initial estimate, click the contact us button here and get the mortgage process started.

While your mortgage broker reviews your current income and equity numbers, she will be able to provide you with a pre-approved, non-binding mortgage confirmation. With this document, you can enter into negotiations for closing a transaction in a competitive real estate market, however the final and mortgage approval can only be made once the property in question is known and can be included in the process.

Apart from the two main inputs – net income and available equity – you also need to develop a view on the current market and on how much security you prefer along with any flexibility you want to ensure during your mortgage commitment to a lender. This is relevant, because interest rates in Germany are usually set for a fixed period of time (10 year fixed rate being the most common). You can also secure today’s interest rate for a longer period of time, for example for 15, 20 or even 30 years. Longer durations come with interest rate premiums, so here the feasibility with your income always needs to be kept in mind. Your mortgage advisor will be your sparringspartner along the process. For more detailed information, visit our blogpost on mortgage financing.

The side costs or processing fees of a property purchase are standardized in Germany and consist of the purchasing tax (Grunderwerbssteuer), the notary and register fees (Grundbuch- und Notargebühren) and in some cases the realtor fee (Maklercourtage). All of these fees will always be calculated a percentage amount of the property purchasing price. When buying in Germany, you should ideally be able to pay the side costs from your savings. Your eligibility for a larger mortgage/loan (100%, 95%, 90% of the property value) then depends on your income and residency situation along with other factors. A solid estimate is to have 20% of equity/savings available for a typical property mortgage.

For every borrower wanting to obtain a mortgage, two factors for a financing are relevant. The first is the property valuation and the second is the borrower’s personal credit rating. For the property valuation, the asking price for a property needs to correspond to its current market value to allow for sufficient collateral for the lender providing a loan. For the personal credit rating, the given income sources need to be sufficient to cover a monthly mortgage rate and still leave enough breathing room for everyday expenses as well as unexpected costs. Additionally, your age becomes relevant, because your income situation will change once you become a pensioneer which in turn effects the maximum duration of a property loan.

In addition to the restriction that apply to every borrower in Germany, there are some additional factors that become relevant once you are a foreigner who wants to buy a property in Germany. Your current residency status is a decisive factor when determining your eligibility for a mortgage to buy property in Germany. EU citizens can usually expect that the same requirements are applied to their case as would be applicable for a German citizen (e.g. up to 100% of the property value). With a permanent residency, you will significantly increase your chances for a higher available loan amount. As a blue card holder or with a dependant visa there are fewer options available, so it can be recommendable to wait until you receive the right status option which is usually linked to the time you have spent in Germany. For more information, check out our blogpost on your residency status.

Newly builts and existing buildings have both benefits and downsides. As most properties are existing buildings you will have a larger pool to choose from, while more risks need to be evaluated than with a new property. You might want to include modernisation measures in an existing property for which you will be eligible to include one or more subsidizes modernisation loan in your overall financing concept. For newly built properties on the other hand the price will be higher as you the standard is state of the art. On the financing side, you also have a different payout schedule for a newly built, as it may take month until you can move in. You will also have to consider flexibility options in your mortgage contract, when you sign a mortgage many months before your property is ready to be taken into possession. Your mortgage advisor will be able to provide you with further details. If you want to learn more, get the process started with finbird digital.

As there are a number of products available for financing different types of property transactions it is possible to create a mix of financing products that will, in some cases, allow an optimization of the overall interest rate paid for a mortgage in Germany. This is often the case, when subsidized loans are included, for example when one plans modernisation measures for an existing property. In such as case, you will have a main mortgage from your primary lender, who will include a subsidized loan tranche as part of your overall financing concept. Have your mortgage advisor review your individual case and your options here.

When reviewing your mortgage application, a lender will always need to evaluate not only your personal eligibility for a mortgage but also if the property in question is par to market value. Lenders use a specific database for property valuations that tracks a large number of properties and their respective market valuations. As your mortgage advisor also has access to this database, she will be able to benchmark an asking price received from a property seller or realtor and if price is feasible to ist market valuation. As a bank will use a more conservative your mortgage advisor can provide a probability if a financing will be possible or if you need to increase your savings portion. To get the process started, click on the contact us button here.