Mortgage in Germany
In Germany, one of the lowest mortgage interest rates in Europe. German banks provide loans to buy an apartment or house and residents and foreigners. Mortgage registration lasts an average month and costs about 1% of the loan amount.
If an investor buys real estate in Germany for rent, the loan increases the return on invested capital at the expense of leverage, since the cost of borrowed money is usually less than the proceeds from the lease. So, when buying an object worth 600 thousand euros, the rental income of which is 30 thousand euros per year, a mortgage of 300 thousand euros at 1.5% per annum will increase the return on invested capital by no less than one and a half times.
Also, the mortgage reduces the amount of income tax: interest expenses are deducted from the income of the investor and thereby reduce the taxable base.
According to the portal Statista, from 2013 to 2016 mortgage rates in Germany decreased on average from 2.77 to 1.63%. Favorable credit conditions stimulate demand. The volume of construction is also growing: in 2016, more than 375 thousand permits for the construction of new residential properties were issued – this is a record figure since 1999.
Bank requirements to the client
To get a mortgage in Germany, you must submit the following documents to the bank:
passport and its copy;
application form with the personal data of the applicant;
confirmation of a stable income (for an individual – a personal income tax certificate, for a legal entity – a company’s reporting);
documents for the property that the borrower plans to buy: an extract from the land register (not older than 6 weeks), housing charter, photographs and a description of the object;
lease agreement (if the property is leased);
confirmation of the availability of funds for the down payment for the purchase of real estate;
the results of an independent evaluation of the value of the object.
All documents must be translated into German and notarized.
– What is a “profile with the personal data of the applicant”? What information should be in it?
– The questionnaire should contain brief information about the borrower, his property, data on monthly income and mandatory expenses (other loans, rent, utilities, alimony) and insurance.
German banks are more willing to finance the purchase of a new house or apartment in a new building. Lenders treat the property on the secondary market more demandingly, carefully assessing the condition of the property and taking into account the year of construction. The bank is more likely to approve the mortgage if the object is leased or will be leased.
If you already have an account in the bank where you plan to take a mortgage, which has been replenished for several years, then the decision to issue a loan will take less time, as this will allow the bank to quickly assess your solvency.
50% of property value. However, less strict requirements are imposed on those who apply for a loan again: a bank can finance up to 70% of the cost.
To resolve the issue of granting a loan and its size, the bank needs an assessment of the facility, which is performed by independent certified specialists. Their services are paid by the client. The loan amount is set as a percentage of the assessed value or the price of the purchase and sale agreement, whichever is lower.
Services of an independent appraiser cost on average 0.2–0.3% of the value of real estate
Services of an independent appraiser cost an average of 0.2–0.3% of the value of real estate BrianAJackson / Depositphotos
Many banks lend only real estate not lower than a certain value (for example, 100 thousand euros).
Interest rates and payments
The average mortgage rate in Germany is 1.5-2.0% per annum. Recently in the country loans with a fixed rate, which is unchanged during the entire crediting period, are especially common.
As a rule, the mortgage is repaid in monthly annuity payments, that is, in equal amounts during the entire crediting period. These payments include both the return of the loan and the interest of the bank for the provision of the mortgage.
The client can agree with the bank on the possibility of early repayment of the loan – most likely, in this case, the lending rate will be higher. If this possibility was not provided in advance, the client will have to pay a fine.
Clients who buy real estate in the mortgage, it is recommended to take a loan with the possibility of accelerated repayment of the principal. Such loans provide the opportunity once a year to pay up to 10% of the body of the loan in addition to annuity payments.