Practice shows that buying real estate in Germany is a profitable investment. Regardless of the purpose of concluding a deal - for your own residence or as an investment in the future - steadily growing real estate prices in Germany will help you quickly offset costs. In this situation, mortgages in Germany in 2021 are attractive not only for German citizens, but also for foreigners, including Russians. Interest rates on mortgages in Germany are now one of the lowest in the history of home loans in the country, and this is with an ever-growing demand for housing.
Real estate in Germany and mortgages
The demand for real estate in Germany exceeds the supply. On the market, it is almost impossible to find new buildings in completed projects. Among the offers are dominated by apartments in buildings, the construction of which is only planned or will be completed in 2-3 years (off-plan purchase).
The spread of real estate prices in Germany is great: they grow in the direction from the east of the country to the west. The most expensive housing in Bavaria, Munich: from 4 thousand euros per square meter. The cost of living space in new buildings in Berlin starts at 2,500 euros per square meter. Secondary housing real estate prices start from 1500 euros.
The annual increase in prices and rental rates for real estate in Germany ranges from 4 to 6 and from 2 to 3%, respectively, depending on the federal state.
The purchase of housing or commercial premises requires a fairly substantial amount. German banks are ready to offer a mortgage loan not only to citizens of Germany, but also to non-residents of the country: the entire amount for the purchase of already built real estate or in several tranches - in case of acquiring an unfinished building, as it is being built.
Mortgage interest rates in Germany are among the lowest in Europe - from 0.8 to 2% for German citizens, from 3 to 5% - for foreigners.
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Mortgages for foreigners: conditions, terms and rates
Foreign citizens have the opportunity to take out loans and buy an apartment on a mortgage in Germany.
Find out how to get a loan in Germany in 2021.
German banks meet the needs of clients from abroad, both individuals and legal entities, especially if the transaction amount exceeds 100 thousand euros.
Credit conditions may be specific for each client. The agreement takes into account a number of factors: the buyer's solvency, the amount of the down payment, the client's credit history, the condition and location of the apartment.
The first mortgage for a foreign citizen in Germany is more difficult to obtain than the subsequent ones. When registering it, you must pay from 40 to 50% of the total cost.
If the client wants to increase the amount, then the bank, as a rule, meets halfway and the interest rate in this case will be reduced. With subsequent registrations of the mortgage, the down payment may no longer be required or be no more than 20% of the total value of the property.
Among other conditions of German banks to the client, the most common are:
- the presence of more than two years of an open account in a bank in Germany, to which the client regularly deposited funds;
- client's age - from 21 to 65 years old;
- confirmation of income on the territory of the Federal Republic of Germany (including from the rental of real estate). Mortgages for foreigners in Germany will become available when submitting a statement of income to the bank for the last six months, from entrepreneurs - account statements for the last two years;
- provision of confirmation of the availability of payments of alimony, loans. According to German law, loan repayments should not exceed 35% of a client's monthly income.
You can familiarize yourself with the state of the real estate market in different cities of Germany regarding rent and all questions related to this topic in the "Real Estate" section.
The maturity of the loan is from five to thirty years. It should be remembered that according to German law, real estate remains at the disposal of the bank until the full repayment of the mortgage.
How to get a mortgage for a foreign citizen
When deciding on cooperation with one or another bank in Germany, it is worth considering the stability, honesty and integrity of German banks: everything is scrupulously calculated, all possible nuances are taken into account. It will not be possible to get a mortgage loan urgently in Germany. Obtaining a mortgage is a leisurely process of several stages, during which you should choose the best option.
Step one: analyze proposals
The search for more favorable loan terms presupposes active use of the existing competition in the banking sector of Germany. In such a situation, it would be more correct not to be lazy, limiting ourselves to two or three banks, but to find time to visit 10 to 15 institutions. This will significantly increase the likelihood that the most suitable option will be found.
So, among the proposals received from banks there will be more profitable ones, which can be mentioned in communication with representatives of other structures. In such a situation, some banks may agree to more favorable terms for the client: slightly lower the interest rate, offer other bonuses (free change in the repayment rate and others) in order to bypass the competitor.
When analyzing proposals, you should be aware that in Germany banks provide loans for repayment or annuity loans with interest rates for 5, 10, 15, 20 years (every new five years lead to an increase of 0.5%). This means that regardless of when payments are made - at the beginning or at the end of the loan, their amounts will be constant.
When analyzing offers, you should pay attention to the characteristics of the property. The Bank will be primarily interested in them, assessing its own risks. A low loan rate can be counted on when the bank's risks are reduced, for example, if the acquired object:
- Recently built - in Germany, buildings are guaranteed for one hundred years;
- located in a good location in terms of ecology, proximity to the city center, logistics;
- intended to generate passive income - the premises will be leased.
The most popular ways to find real estate in Germany:
- real estate firms. The addresses of companies that sell real estate can be obtained on the website of the information and reference portal of the Federal Republic of Germany;
- specialized websites: immobilienscout24.de, immonet.de, stimul.de, immobiliya.de;
- auctions;
- brokers and private ads.
Among the offers, the most affordable prices are for so-called row houses (Reihehäuser) and city apartments (Eigentumswohnung). Higher prices for two-family houses (Doppelhaus) and detached cottages (Einfamilienhaus). Buying premises in an old house (Altbauhauser), despite the spirit of antiquity and, as a rule, location in the central districts of the city, may have some disadvantages: old and problematic communications, lack of comfort. It should be borne in mind that when buying an apartment that is rented, it will be difficult to raise the payment or to evict tenants before the expiration of the contract.
Step two: preparation of the necessary documents
Applying for a loan must be accompanied by the provision of a number of documents. An individual must submit:
- international passport and internal passport (as well as their copies);
- questionnaire (Selbstauskunft);
- a bank statement that confirms the presence of the initial capital;
- supporting documents from the bank on the amount of salary for the last three months;
- tax return;
- description of the property;
- the results of an independent appraisal of the value of the object.
A legal entity will require:
- tax return;
- balance sheet for two years;
- current production and economic analysis of the business (BWA);
- description of the property.
The list of required documents is not final and may differ depending on the requirements of the bank.
Step three: opening a bank account and replenishing it
Payment for real estate in Germany can be made exclusively through a bank, including through Sberbank of Russia - by bank transfer. To obtain a mortgage, a foreign citizen must have / open an account with a German bank. This requires the personal presence of the client ("postal legitimation" applies only to German citizens).
To open an account, you will need originals and copies of your international passport and internal civil passport, registration and completed bank forms. Some banks may require a reference-recommendation, because in Germany they try to deal with "clean" capital.
The account is opened in euros and the corresponding agreement is concluded. You can deposit money into a new account on the day it is opened.
Step four: conclusion of the contract
After agreeing on all the conditions, it is the turn to conclude an agreement for obtaining a mortgage loan. The legal basis for this is the German Civil Code (paragraphs 601-610) and the Law on Mortgage Banks (paragraphs 14-16, 19).
The mortgage lending agreement must contain information:
- on the amount of the loan provided: the amount of the loan and interest deducted from it for the loan and other costs;
- on the conditions for the provision of a mortgage and the necessary payments: the beginning of the payment of interest on the loan, the time of payment, the amount of monthly installments, the calculation of the shares of the interest rate and installments for the repayment of the loan body;
- on the method of paying off the mortgage;
- compliance with the conditions for obtaining a mortgage - an entry in the land register, confirmation of the borrower's solvency, the conclusion of an insurance contract;
- on termination of the agreement: actions of the parties after the expiration of the term, conditions for extending the loan by the bank, consequences for the borrower in case of late payment, conditions for terminating the agreement.
Terms of registration of a mortgage in Germany
Loan processing takes place within a month or more. At the first stage, you need to prepare the necessary paperwork for registration, which takes about two weeks. At the same time, it is worth getting to know the supply market better.
Then you should personally (for foreigners this condition is mandatory) visit several banks and familiarize yourself with the conditions and interest rates, apply for a mortgage - this can take from two to four days or more.
Waiting for the results of a decision on the issuance of a mortgage loan after preliminary negotiations with several banks can take up to 4 weeks. At the last stage, you will have to choose the most advantageous offer, open an account and make a deposit in a chosen bank.
Additional costs when buying real estate in Germany
Everyone who is going to buy a house on credit in Germany should take into account the need to incur additional costs in addition to the agreed price. First of all, the new owner must be entered in the land register (Grundbuchauszug). To do this, you must pay real estate tax.
The tax rate on the purchase price, depending on the location of the object of purchase, can range from 3.5% (Saxony) to 6.5% (North Rhine-Westphalia). German law requires that this tax be paid jointly and severally by the buyer and the seller.
In addition, the buyer pays for:
- re-registration of property rights - from 0.5 to 1% of the purchase amount;
- notary services - from 1.5 to 3%;
- broker / realtor's commission - from 3 to 6% (sometimes together with the seller). Inexpensive objects are paid at fixed rates from 1,500 to 5 thousand euros;
- other expenses (for registration, drawing up extracts from the land register, maintaining a bank account of 150 euros per year).
Registration of a mortgage loan also entails additional costs:
- 1% of the loan amount (for registration);
- payment for an independent appraisal of the object - 1–2 thousand euros;
- Due Diligence (audit of an object) - from 0.5 to 1.5% of its value.
Read more about taxes when buying real estate in Germany here.
Repayment of a mortgage loan in Germany
Early repayment of the mortgage is not profitable for the bank - it loses its profit. But in a competitive environment, banking institutions have to be flexible. For this reason, German banks provide customers with early repayment options. A relevant article is included in the agreement, for example, annually, in addition to annuity payments, to repay 10% of the loan body.
Rate, Zinsen and Tilgung: what they are
The scheme for calculating the payments of an annuity mortgage loan is transparent: the total annual payment (Rate) consists of two amounts: Zinsen - the bank's interest on the loan amount and Tilgung - the annual percentage of the loan body.
By dividing this amount by 12 (according to the number of months), you can calculate the monthly expense. The size of the annuity payment does not change: within it, the Zinsen is constantly decreasing, while the Tilgung is increasing.
A typical German mortgage lending model looks like this:
- a client with the ability to deposit 600 euros monthly as payment takes out a loan of 100 thousand euros for ten years.
- The bank has established a payment rate of 3.22% per annum (3,220 euros) with a monthly payment of 268 euros and 33 cents.
- In this case, 331 euros 67 cents per month or about 4 thousand euros per year (which will amount to 4% Tilgung) is left to repay the loan body.
- German banks seek to reduce Tilgung (offering 1%), and if the client persists to increase this indicator, they increase the interest rate, thus "penalizing" the borrower.
Sondertilgung - the ability to quickly repay the loan body
Foreign citizens who have taken out a mortgage in Germany to buy real estate can reduce their total loan payments. High competition forces the majority of mortgage banks to offer their clients such an opportunity. To do this, it is necessary to enter into it a clause on Sondertilgung-Möglichkeiten when concluding a contract.
This clause entitles you to an annual unscheduled repayment of part of the loan. Before signing the agreement, you should include in it the percentage of such repayment - to pay up to 3 and more percent of the loan amount.
It all depends on how to negotiate. With the right approach, you can raise the size of such payments to 5-7%. But this amount is not necessary: you can make smaller deposits or not make money at all, but when additional earnings or free capital appear, it can be used to pay off the debt without any penalties.
Summing up
Mortgage banks in Germany actively provide loans not only to German citizens, but also to foreigners. Mortgage continues to be one of the most popular mechanisms for acquiring real estate here.
Germany is one of the three European countries with the lowest interest rates. Preference is given to annuity mortgages with fixed monthly payments.
Foreigners who buy housing in new buildings for rent or for themselves are more likely to get a mortgage. In 2021, there are no obstacles for a Russian citizen to take a mortgage in Germany.
The main conditions that banks put forward to foreigners for obtaining a mortgage are the absence of "dirty" capital and minimizing risks. At the same time, mortgage banks benefit (since 1900, no such bank has gone bankrupt), and borrowers have to pay for decades.
