Bank loans in Germany

I took out a mortgage from Commerzbank many years ago and my citizenship was not in question. They mostly want to know your financial situation that you can pay it back. Because of this, residency status is important. They of course won't lend money to a non-resident who might then disappear and not pay it back. With other types of loans I have no personal experience.

On German TV (or with a Google search) one sees a lot of advertisements for cheap loans from companies like smava.de, finanzcheck.de, check24.de, billig-credit24.de.  Some like verivox.de compare the prices of other different loan sites.  Looking at the Smava site as an example, I found the requirements include; being of legal age, having German residency and a German bank account, regular income and an acceptable credit rating. Saw no mention of citizenship requirements. I think they offer extra low rates (even negative interest – however that should work?) for small loans to attract customers. I assume larger amounts might cost more but such operations can work with lower overhead than a normal bank. But as I have never taken such a loan, I cannot endorse any of the mentioned sites.

I took a loan for my appartment in 2016. That time I was only 8 months in Germany. It was a new appartment with a bank from which I got my loan.
I paid 20% of the principle amount and the rest from the bank. I have a contract for 36 years but has to be renewed every 10 years. That means a different percentage of interests every 10 years depending on the market, can be more or can be less. The present interest rates are very low, I pay 1.8% till 2026.
You can also pay an extra amount every year or every month if you can, but the premium every month remains the same, only the interest gets lesser as the principle amount declines.
It is good to negotiate with different banks as every bank has a different offer.
Also you can add a few thousand more other than the apartment price to the loan as you need some for the Notary, Taxes and furnishing.
I hope this information helps. Anything else, please feel free to ask. It's a lot of stress when you 're new to a place and language being a barrier.

John Fernandes wrote:

I took a loan for my appartment in 2016. That time I was only 8 months in Germany. It was a new appartment with a bank from which I got my loan.
I paid 20% of the principle amount and the rest from the bank. I have a contract for 36 years but has to be renewed every 10 years. That means a different percentage of interests every 10 years depending on the market, can be more or can be less. The present interest rates are very low, I pay 1.8% till 2026.
You can also pay an extra amount every year or every month if you can, but the premium every month remains the same, only the interest gets lesser as the principle amount declines.
It is good to negotiate with different banks as every bank has a different offer.
Also you can add a few thousand more other than the apartment price to the loan as you need some for the Notary, Taxes and furnishing.
I hope this information helps. Anything else, please feel free to ask. It's a lot of stress when you 're new to a place and language being a barrier.

A loan on property is called a mortgage. Banks will usually look strongly at one's income but as opposed to other types of loans they know there is collateral in the form of property to give security. I am surprised to hear of a 36 year mortgage. Although 20 or 30 year mortgages are common in the USA, the normal time frame in Germany is 10 to 15 years. Most Germans like to pay off their mortgage and know that they finally own their property, rather than the bank. But in times of low rates, it is a way to lock in to getting cheap money. The risk is that after the period of set interest, in this case 10 years, the new rate could go way up. This scenario is alleviated if one has the option and capital to then payoff or pay down the mortgage as low as possible. If not, it could mean financial disaster.

When I bought my apartment I already had unlimited residency so my nationality was not a factor. But I've heard of foreigners looking to buy property in Germany. This is allowed but doesn't in anyway give one a right they didn't already have to reside or work in Germany.

I have looked into getting a mortgage in Germany to buy a Property now for the future.  In the US , there are now 40 year terms and people only care about the monthly amount.

Prices in Germany are very very high right now.  A significant amount of foreigners from China, Eastern Europe and other parts of the world are buying properties in Germany.  I recently read that in Berlin , they are thinking of a block as it is driving prices out of the reach.

I too have seen 40 year mortgages at German banks and 35 years.  Believe me ,  interest rates will not be 2 percent forever.  Many Germans have bought very expensive homes and when interest rates re set , they will feel the pain.

Nebenkosten are something to be aware of.  Perhaps , now is the time to rent and wait until Interst rates rise and housing prices stabilize or go down ?

puhmuckel wrote:

A significant amount of foreigners from China, Eastern Europe and other parts of the world are buying properties in Germany.

This is certainly not true: The number of non-EU foreigners buying property here is negligible, mainly because owning property does not give advantages in getting visa.
Real estate prices are rising because of the good economic situation (people have money) low interest rates (other kinds of investment are not profitable) and cheap mortgages, but demand is predominantly local.
There are, of course, mortgages with 30 years or longer tenure, but interest is usually fixed for 5, 10 or a maximum of 15 years (with a certain surcharge, of course).
Experience has shown that, even when the economy stalls and interest rates rise, property prices in Germany don't usually fall (and if so, only by a few percent). So hoping for reductions is probably futile.

beppi wrote:

puhmuckel wrote:

A significant amount of foreigners from China, Eastern Europe and other parts of the world are buying properties in Germany.

This is certainly not true: The number of non-EU foreigners buying property here is negligible, mainly because owning property does not give advantages in getting visa.
Real estate prices are rising because of the good economic situation (people have money) low interest rates (other kinds of investment are not profitable) and cheap mortgages, but demand is predominantly local.
There are, of course, mortgages with 30 years or longer tenure, but interest is usually fixed for 5, 10 or a maximum of 15 years (with a certain surcharge, of course).
Experience has shown that, even when the economy stalls and interest rates rise, property prices in Germany don't usually fall (and if so, only by a few percent). So hoping for reductions is probably futile.

Beppi's  response to Puhmuckel is correct. There is NOT a lot of foreign ownership in Germany. True, property prices have gone way up. A major reason is that most other investments have been paying such low interest rates for so many years now that people put their money into property. It is possible that the steady increases in property prices attracts some foreign investment but to say it is the cause is simply wrong. There are places like Vancouver where such a scenario seems to be valid but not in Germany.

And yes, it might be possible to negotiate a long term mortgage of 30 or more years in Germany but the point is that it is not normal. And like Beppi mentioned, even then the interest rate will usually only be fixed for a shorter time. Unlike 20 – 30 years in the USA, most mortgages in Germany are for 10 to 15 years. I don't want to discourage people for sharing here but please get your facts right. Suddenly Puhmuckel posted to 5 threads today - I'm sure with good intentions - but the majority of the comments had misinformation…

Tom, I am offended at your remark that I am posing misinformation.   
I have been following the Real Estate market in Germany and have gathered my information from
newspaper articles and the News (in Germany).

Foreign Investment is present in large Cities and is there that it is part and not the only reason for an increase of Prices.  The other reasons are low to negative interest rate environment , increasing rent and a tight housing market.

Foreign Investment is mostly limited to new Construction of renovated Condo's.

" According to the Berlin senate, up to 68 percent of Berlin apartments were sold to foreigners in 2015: That adds up to around two-out-of-every-three apartments sold. And that's a massive increase: In 2009, only 14 percent were sold to foreigners. It's also a higher percentage than the rest of the country: Handelsblatt research indicates that up to 40 percent of all German apartments and around 50 percent of business properties are sold to international investors."

I am watching the news , studying the markets and posting what I am reading ......

Eine Entschuldigung ist angebracht.

If you are not reading the economic data , please start now. 
I am German and have it has been drilled into us to save and not pay interest.
Now times have changed somewhat due to high prices and low rates.
I have 2 apartments and paid one off in 10 years and another in 5 years. 

READ

Durchschnittsverdiener in Deutschlandbenötigen knapp 27 Jahre, bei einem Tilgungssatz von 2,89 Prozent pro Jahr, um den Kredit für eine 110-Quadratmeter-Wohnung vollständig abzubezahlen. Das zeigt eine aktuelle Postbank-Studie.

Allerdings sind die regionalen Unterschiede zum Teil erheblich. Demnach benötigen Haushalte mit mittlerem Einkommen in Augsburg für die Tilgung ihres Kredits beim Kauf einer solchen Wohnung 42 Jahre. Im Kyffhäuserkreis in Thüringen ist das Darlehen für eine vergleichbare Wohnung bereits nach acht Jahren abbezahlt.
Für die Untersuchung  wurden die Immobilienpreise in allen 402 Kreisen und kreisfreien Städten in Deutschland ins Verhältnis zum jeweiligen Einkommensniveau
gesetzt. Voraussetzung war, dass für die Tilgung wie von Experten empfohlen maximal 40 Prozent des Haushaltsnettoeinkommens aufgewendet werden – bei einem Eigenkapitalanteil von 20 Prozent. In 43 Prozent aller Landkreise und kreisfreien Städte sind demnach Durchschnittsverdiener in der Lage, den für eine 110-Quadratmeter-Wohnung notwendigen Kredit in weniger als 30 Jahren zu tilgen. Dazu zählen unter anderem die Landkreise Osnabrück und Bayreuth sowie die Städte Mönchengladbach und Ludwigshafen am Rhein.

puhmuckel wrote:

Prices in Germany are very very high right now.  A significant amount of foreigners from China, Eastern Europe and other parts of the world are buying properties in Germany.  I recently read that in Berlin , they are thinking of a block as it is driving prices out of the reach.

I did Google this topic and found the following article, among other sites:
https://www.sueddeutsche.de/wirtschaft/ … -1.4106226
Conclusion:
- There is no statistics of how many property owners are foreigner, so any numbers (I saw e.g. 40% somewhere) is bogus. The truth is that simply nobody knows.
- In some (very few) cities, there seems to be an accumulation of certain nationalities (e.g. Russians in Berlin), but there is no proof that that influences the price level substantially - in Berlin the expansion of governmental functions and the city's startup scene are certainly more to blame, as are investors from other parts of Germany ("Schwabe" is a dirty word there now!).
- Some cities (again e.g. Berlin) have thought about restrictions of foreign ownership, but found this legally difficult because
    1. There cannot be any restrictions for EU citizens and companies (by EU rules)
    2. Any rich non-EU-citizen investor can easily open an EU company (e.g. in Luxemburg) and the ompany can then buy without restrictions. So such regulation would only hurt less rich non-EU-persons living in Germany, but not foreign speculators.

puhmuckel wrote:

If you are not reading the economic data , please start now. 
I am German and have it has been drilled into us to save and not pay interest.
Now times have changed somewhat due to high prices and low rates.
I have 2 apartments and paid one off in 10 years and another in 5 years. 

READ

Durchschnittsverdiener in Deutschlandbenötigen knapp 27 Jahre, bei einem Tilgungssatz von 2,89 Prozent pro Jahr, um den Kredit für eine 110-Quadratmeter-Wohnung vollständig abzubezahlen. Das zeigt eine aktuelle Postbank-Studie.

Allerdings sind die regionalen Unterschiede zum Teil erheblich. Demnach benötigen Haushalte mit mittlerem Einkommen in Augsburg für die Tilgung ihres Kredits beim Kauf einer solchen Wohnung 42 Jahre. Im Kyffhäuserkreis in Thüringen ist das Darlehen für eine vergleichbare Wohnung bereits nach acht Jahren abbezahlt.
Für die Untersuchung  wurden die Immobilienpreise in allen 402 Kreisen und kreisfreien Städten in Deutschland ins Verhältnis zum jeweiligen Einkommensniveau
gesetzt. Voraussetzung war, dass für die Tilgung wie von Experten empfohlen maximal 40 Prozent des Haushaltsnettoeinkommens aufgewendet werden – bei einem Eigenkapitalanteil von 20 Prozent. In 43 Prozent aller Landkreise und kreisfreien Städte sind demnach Durchschnittsverdiener in der Lage, den für eine 110-Quadratmeter-Wohnung notwendigen Kredit in weniger als 30 Jahren zu tilgen. Dazu zählen unter anderem die Landkreise Osnabrück und Bayreuth sowie die Städte Mönchengladbach und Ludwigshafen am Rhein.

For the readers here one should post in English!

But what are you trying to say here? That you are German doesn't validate your argument.  Maybe if you had a degree in Finance and Economics like I do then it would carry some weight. And nothing in this article (wherever it came from?) proves any of the points you made. It merely states that it would take the average wage earner 27 years to pay off the average 110 square meter apartment at an interest rate of 2.89%. This is just taking the price of the average 110 sq. meter apartment, the average income and figuring out how many years at that rate it would take to pay off. It says NOTHING about the actual statistics. It's like saying the average person can run a kilometer in 10 minutes thus that is how long it would take for a trained athlete.

What is interesting in Germany is that while many earn OK, the cost of property has outstripped increases in income over the years. This brings up the question of how Germans afford the high property cost? But that does NOT mean that people simply take a 27 year mortgage. Number one, it ignores the amount of down payment on the property. In America people often buy property with almost nothing down, financing it all through a mortgage. In Germany people tend to invest much more up front and take a much smaller mortgage. In America, people usually finance their own home without a lot of assistance from parents or other relatives. In Germany the social and legal ties are different. There are also many more multi-dwelling homes. Many young German couples will only afford a house because they get money contributed from relatives – or inherit the property.

I am posting a link that gives an overview of the credit situation in Germany. It says the average actual mortgage in Germany is for 73 months! Also, looking at the size of the mortgage; in Baden-Württemberg, the prosperous region where I live, it is 183,000 Euros. Now look at my second link, it shows an average price (2017) in Baden-Württemberg of € 2580 per sq. meter for apartments and € 2190 for houses. If one assumed an average apartment of 110 sq. meters like the statement you posted, one comes up with a price of € 283,800. There is room for error by using different sources for these statistics but it is clear; the average mortgage amounts to around 63% of the average cost of an apartment. The reason being that Germans tend to finance 30 – 40 percent of an apartment purchase with money up front rather than doing it exclusively through a mortgage.

A historical reason for this is that Germans tend to be cautious with their money and avoid debt. Financially, if one can lock in long term at the present low interest rates then they are better off taking a larger and, if needed, longer mortgage. But as previously mentioned, most long term mortgages being offered by banks do NOT lock in the interest rate for the whole time. Most set a rate for the first 5 or 10 years and then it gets adjusted to market rates. The banks aren't stupid. They assume rates will go up again and are not willing to guarantee such low rates as we have now for 20 or more years. For the buyer with little additional capital, this is a big risk as the interest rates could go way up. If one has additional capital then they could choose to simply pay off the mortgage at that time instead of paying the higher rates. An early pay-off option is standard with such mortgages if the rates go up, otherwise one is usually stuck with paying off in the time frame contracted. If one does lock into a rate for say 15 – 20 years and rates then go down significantly, the bank will not let one just pay off the mortgage early.

https://www.financescout24.de/wissen/st … tudie-2014https://www.immowelt.de/immobilienpreis … ungspreise

To add to what Tom wrote above:
In Germany, if you want to finance more than 70% of a property by mortgage, the interest rate a bank offers increases - due to the increased risk for the bank. This makes purchases with less than 30% downpayment ("Eigenkapital") generally uninteresting.

This statistic illustrates the mortgage interest rate in Germany from the first quarter of 2013 to the first quarter of 2018. It can be seen that the mortgage interest rate in Germany decreased overall during the period under observation, reaching a value of 1.63 percent as of the fourth quarter of 2016. Since then the mortgage rate has risen slightly as of the first quarter of 2018. The largest mortgage interest rate during this period was found in the fourth quarter of 2013, when a mortgage interest rate of 2.84 percent was recorded.

https://www.statista.com/statistics/614 … ny-europe/

Thanks Tom, I do have an Accounting Degree.  I agree with all of the Information about loans, however here in the USA it is not easy to get a mortgage with less than 20 down any more.  Things have changed.  The last place I bought put me through the ringer and my credit score is over 800.

Also, my original response and interest pertained to the top poster.  He did get a 36 year loan.   Recent news articles and Spiegel Reports have reported similar trends.

Guestposter65 wrote:

Thanks Tom, I do have an Accounting Degree.  I agree with all of the Information about loans, however here in the USA it is not easy to get a mortgage with less than 20 down any more.  Things have changed.  The last place I bought put me through the ringer and my credit score is over 800.

Also, my original response and interest pertained to the top poster.  He did get a 36 year loan.   Recent news articles and Spiegel Reports have reported similar trends.

Nobody said that a long term mortgage is not possible, they do exist. But for readers' information it is misleading to suggest this is now the norm when it is still the exception. And when banks do things out of the norm then they will usually demand special conditions; higher interest rates, more money down or other assets committed as collateral – or a combination of these things.

Most commonly a mortgage is 25 years, but you can take out one to meet your needs. This is Germany, not America. remember.

Guestposter65 wrote:

Tom, I am offended at your remark that I am posing misinformation.   
I have been following the Real Estate market in Germany and have gathered my information from
newspaper articles and the News (in Germany).

Foreign Investment is present in large Cities and is there that it is part and not the only reason for an increase of Prices.  The other reasons are low to negative interest rate environment , increasing rent and a tight housing market.

Foreign Investment is mostly limited to new Construction of renovated Condo's.

" According to the Berlin senate, up to 68 percent of Berlin apartments were sold to foreigners in 2015: That adds up to around two-out-of-every-three apartments sold. And that's a massive increase: In 2009, only 14 percent were sold to foreigners. It's also a higher percentage than the rest of the country: Handelsblatt research indicates that up to 40 percent of all German apartments and around 50 percent of business properties are sold to international investors."

I am watching the news , studying the markets and posting what I am reading ......

Eine Entschuldigung ist angebracht.

Nope, there is not a huge amount of outside foreign investment although it has increased. Statistics of “foreigners” buying in Belin will of course include domestic buyers that are not German citizens. And yes, there are lots of immigrants in Berlin. But these are mostly now German residents. And I take the claims of Handlesbaltt with a grain of salt because they are a questionable media source. They write preposterous stories full of hyperbole headed by clickbait. They often use some real statistics but then twist the conclusions one should draw from them to their ideology. OMG there is going to be a market crash sells better than the truth.

The structure of the German property market is much different than in the USA. That said; it is true that the German property market has probably become over-heated in some locations. Prices cannot rise dramatically in the coming years like they have for the last 10 years or so. Or not sustainably so. Thus anyone hearing about “great opportunities” investing in German property are simply too late. One should have gotten into to the market 10 years ago.  Buy low, sell high is still a fundamental tenant of investing. Smart investors are selling off property in Germany, taking their profits and looking for undervalued investments elsewhere. Even if the market doesn't slide or crash there is simply not a lot of room left for additional profits that outweigh the increasing risk.

SimCityAT wrote:

Most commonly a mortgage is 25 years, but you can take out one to meet your needs. This is Germany, not America. remember.

Again, one can get longer term mortages but in Germany the most common is still a 10-year fixed rate mortgage.

@Priscilla I have a question related the mortgage Loan and in particular the barrier language. Maybe you can provide some guidance or suggestion about the following:

A German Bank has accepted the loan request, and having satisfied their financial criteria, they made an offer sending all the documents to sign.

Then after realizing that I am going to use a translator during the Notarization process, it looks they are changing mind and very likely rejecting the request, because I do not speak German. They think I cannot maybe understand their contract.

What are my rights in that situation ? As European citizen is it legal their motivation ?

thanks in advance for sharing your thoughts