Home Loans - Riootech
There are many leading mortgage brokers in Germany who specialize in providing loans to expats interested in buying German property.
There are also many German banks to choose from and some of them specialize in mortgages for foreigners. They have access to international lenders who offer home loans and re-mortgages.
Although German banks offer financing options to foreigners, they cannot finance more than 60% of the purchase price. While some German banks are willing to fully finance, loans of around 80% are more common.
If you have used a mortgage lender in Germany, most lenders offer 80% of the loan. Mortgage lenders in Germany allow you to borrow up to 100% of the property's value (although you have to cover some other costs of buying a home with your own funds, such as purchase costs).
How do mortgages work in Germany?
In a normal scenario, German citizens can usually borrow up to 80% of the property value. Although some lenders allow you to borrow up to 100% of the value of the property, if you are not a German citizen, you should expect a higher upfront deposit.
On the other hand, in Germany, residents can receive an appropriate amount of up to 80% of the total costs (including notary and brokerage fees), while German mortgages for non-residents will be funded up to 60% of the final costs.
The commission for processing a mortgage loan is usually 1-2% of the total loan amount. Since mortgage rates and fees vary from lender to lender, even small differences in interest rates or management fees can result in substantial additional payments over the life of the loan.
When banks decide on mortgage rates, it usually depends on whether the borrower can repay the loan and how quickly you can repay it.
While mortgage rate decisions are up to the bank, understanding the factors that affect mortgage rates can help you better prepare to negotiate rates with lenders.
Since there are more than 400 mortgage lenders in the German real estate market, and each bank uses different criteria when assessing mortgage rates, you cannot find the best rate just by contacting the bank directly. Competition among German banks is fierce, so it is highly recommended to compare the various mortgage options offered in the German real estate market.
Home loans can be obtained from conventional banks, savings banks, specialist real estate banks (Bausparkassen) or insurance companies.
All types of real estate can and are usually secured by a mortgage, and the interest rate should reflect the lender's risk. In most jurisdictions, lenders can foreclose on property under certain conditions, most notably non-payment of the mortgage.
In the latter case, mortgage insurance can be withdrawn when the lender notifies the borrower or his successor of an increase in property value, the loan has been repaid, or both, to reduce the loan to less than 80%. .
Buying property and living within your means
BaFin can use this tool to limit the number of mortgages to depend on the value of the property used to secure the loan.
The interest rate can only be determined after determining the value of the property, among other things, because it is the cost of your borrowing and determining the loan/value ratio (the ratio of the loan to the value of the property), the most important part of determining the interest rate.
As long as you stay below this price-to-rent ratio, your mortgage payments can be the same or even lower than the price of your rental property.
In the case of a fixed-rate loan, you can choose to pay an additional amount along with the interest, which ends up covering all or part of your repayment costs.
If you decide to finance your real estate, you can also make an additional annual payment to pay off your loan faster. Some lenders also allow you to change principal payments up to five times during the life of the mortgage.
Some German mortgages require you to start repayments immediately, while others allow you to delay full repayments and only pay interest.
For example, if you didn't close the bank on your mortgage because you decided to wait to buy real estate.
The bank won't tell you that you can pay off your next loan with a so-called term loan 5 years before your first refinance date.
The bank won't tell you that you can exercise your right to foreclose after 10 years and then refinance with another bank, or sell your property tax-free under German Gesetz.
You must start paying interest before you move, which means you may have to pay rent on your current home at the same time you pay interest on your new property.
It is important to note that you can apply this credit not only to the sale price, but also to renovations, mortgage adviser fees, and closing costs such as notary fees or property transfer taxes.
Typically, various loans can be combined with conventional mortgages to lower overall costs.
How much can you borrow in Germany?
Whether you're buying an existing property or a new build, Buy Berlin can provide you with a mortgage of up to 70% of the purchase price, with higher credit limits only available for local buyers.
The minimum mortgage loan amount is EUR 100,000 and the maximum loan amount is not available but should not exceed 65% of the purchase price of the German real estate.
Among other things, typical types of mortgage loans are a fixed-rate loan structure (with repayment of principal and interest) and an interest-only loan structure (in German, Zinszahlungsdarlehen).
A so-called fixed-term mortgage allows you to lock in the interest rate on the loan amount at the end of the term or at the 10-year mark, whichever comes first.
The complex financial product works similarly to a mortgage where you negotiate the loan amount, the interest rate, and the monthly payment you make into a savings account each month.
