Mortgage Germany
Last update: 13 July 2023
A mortgage serves as collateral for a large loan. It is used primarily in real estate financing and gives the lender the right to settle its claims by selling the property in the event of the borrower’s inability to pay.
So, anyone considering building or buying a home will quickly come across the term “mortgage rates.” The higher they are, the more you have to pay for your home financing. We explain the background and show you which factors influence the mortgage interest rate.
Topics Overview
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At a glance – Top Mortgage Providers Germany Overview
Below you will find a summary of mortgage providers in Germany that offer good service and are easy to deal with.
Hypofriend
- Service available in English
- Best interest rates
- Recommendation engine calculator
- Completely online
Dr. Klein
- Comparison of 250 banks
- Individual consultation throughout Germany
- Preparation of personal redemption plans
What is a mortgage loan?
A mortgage loan is a loan secured by a mortgage. With the introduction of the land charge, mortgages have become rare in practice nowadays. Therefore, the word “mortgage loan” is mainly used as a synonym for real estate financing, even if a land charge serves as collateral.
In the mortgage loan comparison at germanymore you can find the offer with the most favorable interest rates and conditions in Germany.
Mortgage and land charge (Grundschuld)
Grundschuld and mortgage are variants of the land charge, but the land charge is more flexible. When the loan is paid off, the mortgage automatically decreases and cannot be reused. Similarly, when a loan is granted, the money must go exclusively to the property. For this reason, the mortgage is rarely used in practice.
With a mortgage, the lender (usually a bank or building society) can put the encumbered property into receivership or foreclosure if the borrower fails to meet his payment obligations. Corresponding agreements are stipulated in the loan contract. In addition, the bank secures the right of liquidation by entering the mortgage in the land register in Germany.
Actual mortgage rates: The most important facts in brief
How high mortgage rates are right now depends primarily on the interest rates set by the European Central Bank (ECB). At its most recent meeting on June 10, 2021, the ECB left the key policy rate unchanged at 0 percent.
Construction interest rates were historically low from July 2020 to February 2021. Since then, they have risen somewhat, by an average of about 0.15 to 0.20 percentage points.
Current construction interest rates for standard financing are around 0.9 to 1 percent effective. The loan amount is then 80 percent of the property value, and the fixed interest rate is ten years.
This is how you proceed
Before buying or building a property in Germany, you should check the current level of interest rates and the current interest rate forecast.
Favorable mortgage rates alone are no guarantee of a good deal. More important than the last tenth of a percent in interest rates is the right financing concept. Therefore, talk to a consultant about the current construction interest rates.
Providers for Mortgages in Germany – Detailed Overview
Hypofriend
Hypofriend GmbH is an independent real estate financing broker registered with the Berlin Chamber of Commerce and Industry. Hypofriend works with over 400 partner banks to find the optimal real estate financing.
Hypofriend’s core mission is to make the real estate financing process much easier and more transparent in Germany. They help customers understand why buying real estate makes sense and what type of loan best suits their financial future.
Service available in English
Best conditions from over 750 banks throughout Germany
Free of charge video call advice
Free real estate financing recommendation in less than 10 minutes
Best interest rates for and financing that fits your personal situation
Dr. Klein
Dr. Klein is one of the largest financial service providers in Germany. Originally coming from financing for the municipal housing industry, Dr. Klein is continuously expanding its expertise and can now draw on more than 60 years of experience in the field of finance. Dr. Klein’s consulting is based on the principles: Sustainability, Holism and Comprehensibility.
With more than 600 consultants, Dr. Klein is represented for you at over 250 locations throughout Germany and is designated to leave no questions or needs for your mortgage in Germany unanswered in every customer contact.
Best offers from 250 banks throughout Germany
Secure interest up to 5 years in advance
Numerous calculators for planning construction financing
Preparation of personal redemption plans
Amount and liability
The amount of the mortgage in Germany depends on the value of the property. As a rule, it can be 60 to 70 percent of its market value, because the loss in value of the house or apartment is also included.
If property owners need more money for financing, they have to take out another mortgage. The value of the property in Germany is usually determined by an appraiser. The bank will then calculate the amount of the mortgage.
The property owner on whose land the mortgage is registered is the security provider. Usually he is identical with the borrower, however, it is also possible to mortgage one’s own property in Germany as loan collateral for another person.
In addition to the real estate itself, its essential components as well as the accessories to the real estate and any insurance indemnities can also be used for liability.
Costs for a mortgage in Germany
If you want to take out a mortgage in Germany, you have to expect certain costs. For example, you have to pay the appraiser who determines the value of your property. In addition, the mortgage contract must be drawn up at a notary, which also involves costs. You should also not forget the fee for the land register entry about the mortgage.
How do I find the best real estate interest rates?
You can get a very good overview of the current offers online with a mortgage interest rate comparison in Germany. There you will find the conditions of several hundred providers and can make a selection at your leisure at home. With our construction financing comparison, you will receive with just a few details the current real estate interest rates tailored to your requirements in a clear table.
Displayed to you in a detailed comparison:
- Name of the loan provider
- the effective and the debit interest rate
- the monthly rate you have to pay
- the interest costs incurred
- a brief evaluation of the respective offers carried out by experts
The following information is required:
- the value of the property
- the loan amount
- the desired duration of the fixed interest rate
- the repayment rate
- the region in which the property is located
If you change individual details of your desired loan, such as the duration of the fixed interest rate, new offers are displayed immediately. In this way, you can determine the mortgage interest rates that suit you best and are tailored to your individual needs in Germany.
Example calculation: mortgage interest rates in comparison
We will show you how to use the calculator when searching for the best mortgage interest rates in Germany using an example. You want to build a property worth € 300,000 in the Hanover area and need a loan of € 200,000. If you choose a fixed interest rate of 10 years and a repayment rate of 2%, you will receive the following conditions as the most favorable offer (as of 02.11.2020):
- Effective interest 0.28 %
- Debit interest rate 0.25 %
- monthly installment: 380,00 €
- Total interest costs: € 5,039.56
The difference between debit interest rate and effective interest rate is important
- The debit interest rate (formerly also nominal interest rate) describes the interest rate that the lender charges for the borrowed money as a kind of “lending fee”. If there is a fixed interest rate for a certain period, the borrowing rate remains unchanged for this period.
- The effective interest rate (often also called the annual percentage rate) includes ancillary costs of the loan that you have to pay. These are, for example, processing and arrangement fees. Therefore, the effective interest rate is more suitable for comparing offers. It must be included in every loan offer in Germany. However, not all cost factors are included in the effective interest rate. For example, it does not include expenses for appraisals, residual debt insurance and possible commitment interest for later disbursement.
How is the personal interest calculated?
The higher the loan and the greater your equity, the more favorable the interest rate offer. On the other hand, you will pay more interest if the interest rate is fixed for a longer period and the repayment amount is low. A contractually stipulated unscheduled repayment right also leads to higher interest rates for your mortgage in Germany.
These factors lead to higher mortgage interest rates:
- little or no equity capital
- low loan
- Long fixed interest rate
- Low repayment amount
- unscheduled repayment rights
Influence of your personal circumstances on the interest calculation
The better your credit rating (creditworthiness) and the more secure your job (for example, as a civil servant), the more favorable the interest rates. You will also pay less interest if you use the property yourself. If you build or buy in a region that is in particularly high demand and expensive, for example in southern Germany, even then you can expect higher interest rates.
Learn in this article how to check your personal credit rating.
Factors that increase your mortgage interest rates:
- poor creditworthiness (credit rating)
- insecure job (e.g. temporary employment, self-employment)
- external use of the property
- property in popular, expensive residential area (e.g. southern Germany, Stuttgart, Munich)
This means for your home financing: You will receive a better interest rate if you…
- can prove a high creditworthiness (positive information from Schufa and high income),
- have a secure job (for example, as a civil servant),
- use the property yourself (no outside use, no renting),
- build or buy in a region with low real estate prices,
- take out a relatively high loan (the higher the better),
- bring a lot of equity capital (at least 20 to 30 % of the purchase price),
- choose a short fixed-interest period (5 years),
- opt for a high rate of repayment (at least 2%),
- do not insist on special options such as unscheduled repayment rights.
Summary – Mortgage Germany
Of course there are many more mortgage comparison providers on the market, but I hope this article gives you a good overview about the topic mortgage in Germany. If you want to compare also personal loan, check out this comparison.
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