Mortgages in Germany are affordable, local residents pay less than 2% per annum on real estate loans. For foreigners, the conditions are worse: the rates are higher, more documents are required, borrowers are carefully checked. Nevertheless, even people without confirmed income in the eurozone can count on leverage.
Real Estate Loans in Germany
According to the analytical portal Statista, about 25% of families in Germany have a mortgage loan (statistics for 2019). The share is impressive, given the fact that almost half of the country's population rents housing, and does not own property.
However, the share of real estate owners is growing every year, which means that the demand for mortgage loans is also growing. Interest rates in German banks have reached a record low. If the apartment is rented out, the rent covers the costs of maintaining the property and paying off the mortgage loan.
German banks strictly evaluate applications for mortgage loans. It is especially difficult to obtain a loan for those applicants whose source of income and reliability is difficult to verify. This category primarily includes foreigners who are not residents of Germany or EU countries.
Nevertheless, these German banks are ready to cooperate with immigrants from third countries:
Deutsche Bank
Raiffeisen Bank
Volksbank
Commerzbank
Münchner Bank
Sparkasse Bank
Mortgages for foreigners
Officially, there are no restrictions on obtaining a mortgage loan for foreigners in Germany.
The maximum amount of credit that you can count on depends on your status in the country. Residents of Germany can borrow up to 100% of the property value. Non-residents, most likely, will be provided with a maximum of 50% when applying to the bank for the first loan. If the applicant already has real estate in Germany or already paid at least one mortgage loan here, then it is quite possible to count on a loan of up to 60-70%.
Ekaterina Demidova, the General Director at Dem Group GmbH:
German citizens can also get a loan for 100% of the real estate value. For others, a loan is possible if they have their own capital of €100,000 at the rate of 50/50 – that is, half of the cost of the property is paid by the client, and half by the bank. Accordingly, financing is possible with a budget of €200,000.
The potential mortgage holder must meet certain criteria.
The main task of the loan applicant is to confirm financial well-being, stable job, high salary and legality of the source of income.
Among the mandatory requirements:
a regularly filled bank account active at least the past two years;
availability of funds for the initial payment;
age – from 21 to 65 years;
proof of income (for individuals, this is a certificate of income for the last six months, a salary sheet from the place of work, from entrepreneurs – statements of cash flow on accounts for the last two years);
no bad credit history.
Attention! The payment of loans should not take more than 35% of the income per the month.
Ekaterina Demidova, the General Director at Dem Group GmbH:
A person who permanently lives else where can still get a loan for the purchase of real estate in Germany. At the same time, three conditions must be met.
Submit a certificate from the bank on the availability of equity capital in the amount of 50% of the property value.
Submit a certificate of income (the ideal borrower's salary must exceed €2,000 per month).
Conclude a lease agreement for the purchased property. Unfortunately, it is now unrealistic to buy an apartment on credit for personal residence for a person who does not live in Germany and does not have an income in the country.
German mortgage calculators will help you determine the size of the available loan and the monthly payment:
The purchased property will be pledged by the bank until the mortgage is fully repaid. The lender is interested in protection in case of default in payment, so the liquidity of the property must be checked.
Banks are willing to issue loans for housing in large cities of Germany. Liquid objects are those that can be leased out in a short time, and profitably sold, if necessary.
The application will most likely be approved if:
the property is a new house or apartment in a new building;
the property has a good location according to the bank;
the property is intended for making a profit from renting out.
Banks are more demanding of properties on the secondary market, they check the condition and take into account the year of construction. The bank will be more willing to issue a mortgage loan for a secondary real estate property with a valid lease agreement.
If the bank has assed a porperty as risky, then the loan may be refused.
Ekaterina Demidova, the General Director at Dem Group GmbH:
Last year, banks have become reluctant to finance the purchase of commercial real estate due to the fear of restrictions on the work of companies caused by the coronavirus.
List of Documents
Documents of a foreign borrower
International and internal passports of a borrower, as well as their copies
A filled bank questionnaire form with the personal data of the borrower
Availability of capital to pay 50% of the price of the property in any currency (certificate no older than three months)
Confirmation of a stable income (certificates of income from work for individuals, financial statements of the company for legal entities)
Certificates of ownership of existing real estate in any country and their copies
Information about available loans in the EU/USA/Switzerland, as well as in your home country
Information about securities and deposits in banks
Statements on the movement of funds on accounts
Real estate documents
Extract from the Land Register
Energy passport of the property, the layout of the room
Extract from the cadastre for a land plot
A copy of the lease agreement (if the property is for rent)
For apartments-the minutes of the meeting of the owners ' association with the calculation of utility payments
Conclusion of an independent appraiser on the cost of housing
All documents must be translated into German and notarized.
Ekaterina Demidova, the General Director at Dem Group GmbH:
If a borrower is not a German citizen, then they also present a certificate of income from the place of living and working. It must be translated into German.
The amount of equity capital (% of the property value)
Minimum 40% (for non-residents)
Interest rate on the loan
The average loan rate in Germany is 1.5%. For non-residents it varies from 2.39% to 4.60%
Maximum term of the loan agreement
35 years old
Average loan term
10-20 years old
Early repayment
Possible, but if you do ask for this option in advance, you will have to pay a fine to the bank
Fixed-rate mortgages are popular in Germany. During the entire period of validity of the loan agreement, the client pays equal monthly payments to the bank.
It is possible to apply for a loan with a floating rate. The interest is reviewed once a quarter based on changes in the average interbank lending rate Euribor and the cost of the loan for a particular bank. To date, the Euribor rate has reached negative values, which means a risk for the borrower.
Real estate options in Germany available for purchase right now
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In addition to the cost of paying off the mortgage loan and interest on it, the borrower expects a number of related expenses. The most important of them are:
Property tax – 3.5–6.5% of the property value
The fee for re-registration of the object to the new owner is 0.5-1.0% of the transaction amount
Notary fee – 1.5-3.0% of the price of the object
Commission to a real estate broker – 3-6% of the purchase price
Inclusion of a new home owner in the land cadastre – 0.5%
The commission for making a loan is about 1% of the loan agreement amount
The fee for evaluating a potential collateral object is €1-2 thousand.
Object audit – 0.5-1.5% (optional)
Life insurance – about €100-300 per year, depending on the age and health of the person
Real estate insurance (Wohngebaudeversicherung) - €100-500 depending on the type of insurance and the amount of coverage
Other expenses (maintaining a bank account, issuing statements and certificates) - up to €150 per year
Factors which can affect the positive response of the bank when considering a loan application
Ekaterina Demidova, the General Director at Dem Group GmbH:
Preparation of documents in cooperation with a specialist can increase the chances. The professional has experience in obtaining loans, knows the requirements of the bank, will check the package of documents beforehand and will help fill out a bank questionnaire.
The review process in 2020 was slowed down due to the remote work of some of the bank's employees, and despite the fact that all restrictions have now been lifted, many people have not returned to the offices. The average speed of processing a loan application now ranges from one to two months. During this time, the bank may request additional documents or ask questions that must be answered promptly so that the deadline does not stretch even further.
Banks can refuse a mortgage, if the source of the origin of their own capital is unclear. For example, with a salary of €1,200 per month savings of €200,000 will cause the bank to question their origin. In the absence of a clear answer, the loan may be declined.
