• Rule of thumb: 20 percent equity should be available for real estate or construction financing. 
• Use the low-interest phase to make higher repayments. 
• Additional costs can make up to 15 percent of the property purchase price and must be considered in real estate financing. 
• Insurance secures the property loan and building. We are happy to provide you with more clarity during our consultation, as well as about the various loans and conditions.

• Comparison of loans and conditions from over 400 lenders
• Free overview of various loans, as well as offer creation and advice
• Secure follow-up financing up to 60 months in advance with attractive terms 

Have you found the right property? Or do you want to build your own home? Then you need a solid loan with attractive terms for real estate financing.

While the requirements for a property may vary, the financing process for real estate or construction financing always follows the same steps—with the help of a financing plan:

Planning Phase of Real Estate Financing

In the planning phase of real estate financing, the focus is on selecting the right property and determining the available equity needed for financing.

• Check available equity for the property
• Verify (or have verified) the purchase price of the property
• Thoroughly assess the location of the property
• For developers: Agree on a fixed price
• For investment properties: Clarify tax-related questions

Optimization Phase for the Property

The optimization phase of real estate financing includes structuring the equity for financing, determining the required external financing, and setting the best possible fixed interest rate for your loan.

• Optimize the use of equity for real estate financing
• Compare offers from other properties and get an overview
• Consider public funding options for property financing
• Choose long-term financing or construction financing options
• Ensure flexibility in financing

Security Phase: Protecting Your Family and Property

In the security phase, you protect both your family and your property.

• Secure personal risks that could endanger your property
• Protect against extreme risks (natural disasters)
• Consider follow-up financing for your real estate or construction financing
• Build reserves for major expenses (e.g., roof renovation)
• Utilize special repayment options for the loan

Before approving a loan for real estate financing, banks require property buyers to submit several documents, including:

• Copies of pay slips from the last three months
• Income tax assessments from the past two years
• Proof of available equity, such as statements from savings or fixed-term deposit accounts
• Property documents for the real estate to be financed

Important: Since the implementation of the EU Mortgage Credit Directive in Germany, banks now assess more thoroughly whether the borrower can realistically repay the loan in full within a reasonable timeframe. Therefore, having a detailed overview of your financial situation is essential for real estate financing.

How Banks Assess a Borrower for Loan Approval

The conditions a borrower receives for real estate or construction financing depend on several factors. Banks view certain aspects favorably, such as:

• A permanent employment contract or civil servant status
• A good credit score (Schufa score)
• The property being in a prime location

On the other hand, factors that may complicate loan approval include:

• A temporary employment contract
• An ongoing probation period
• Self-employment

These factors can significantly hinder obtaining a loan for a property.

How Much Property Can I Afford?

If you're considering building or buying a property, the first step is to assess your financial situation:

• What are my fixed income and expenses?
• How much money do I realistically have available each month to repay a loan?

From this, you can determine a suitable budget for your real estate or construction financing.

Important: A crisis-proof financing plan should account for unexpected financial difficulties due to unemployment, illness, or divorce.

How Much Equity is Recommended for Real Estate Financing?

While real estate or construction financing is possible without equity, it is not advisable. Even though interest rates are currently very low, making loans attractive, you should ideally contribute at least 20% of the property financing from your own funds, in addition to covering ancillary costs. 

What Loan Term Should You Choose for Property Financing?

Interest rates for real estate loans are at a historic low, making long-term loans particularly attractive for property financing. Therefore, you should choose a fixed interest rate period of at least 15 years.

What is the Optimal Repayment Rate for Real Estate Financing?

A higher initial repayment rate helps reduce the remaining debt on your real estate or construction financing more quickly. With each payment, the interest portion decreases, and the repayment portion increases.

Tip: Take advantage of the current low-interest phase and aim for a repayment rate of at least two percent.

Extra repayments can be beneficial. If you receive bonus payments or an inheritance, making an additional repayment can lower your interest payments and accelerate loan repayment.

For every real estate or construction loan, the bank provides a repayment plan, which details the loan’s repayment structure, including the proportion of interest and principal payments as well as the remaining debt.

How Quickly Can You Get a Loan for Real Estate Financing?

From the initial loan request to signing the purchase contract, the path to real estate financing can be lengthy. However, the process for securing a real estate or construction loan moves faster if you submit all the necessary documents to the bank promptly.

The additional costs associated with purchasing or constructing a property (construction financing) should be carefully calculated in advance. These costs range between 9% and 15% of the purchase price. For a property costing €300,000, this amounts to an additional €27,000 to €45,000.

Additional costs for real estate or construction financing may include:

Property Transfer Tax

• This tax applies to every purchase of land or property.
• It varies by federal state and ranges between 3.5% and 6.5% of the purchase price.

Real Estate Agent Fees

• If a real estate agent facilitates the purchase, they charge a commission.
• The typical commission ranges from 3% to 7% of the property price.
• Depending on the federal state, the buyer may be responsible for either the entire commission or 50% of it.

New Regulation from December 23, 2020:

"Law on the Distribution of Broker Costs for the Mediation of Purchase Agreements for Apartments and Single-Family Homes"

• In many cases, the seller and buyer now share the real estate agent's commission.
• Applies only to broker contracts for the purchase of apartments and single-family homes (including semi-detached houses).
• The buyer must be a consumer.
• The broker agreement must be in text form.

Notary and Land Registry Fees

• The purchase contract for a property is only legally binding once it has been notarized.
• Notary fees are regulated by law and amount to approximately 1% of the purchase price.
• A land registry entry is required to document ownership and any existing mortgages or land charges.

When purchasing a property, notary and land registry costs typically amount to around 2% of the purchase price (approximately 1.3% for the purchase and 0.7% for financing). 

Annuitized Loan (Annuitätendarlehen)

The most common type of real estate or construction financing. Its key features include a fixed monthly payment consisting of interest and principal repayment. Over time, the repayment portion increases, while the interest portion decreases.

Advantages:

• Fixed interest rate throughout the entire term
• High level of financial planning security

KfW Loan (KfW-Darlehen)

Loans offered by the Kreditanstalt für Wiederaufbau (KfW) provide particularly favorable interest rates for your financing. However, eligibility for these loans is subject to specific conditions.

Building Savings Contract (Bausparvertrag)

During the savings phase, you can build equity capital for your future property while securing currently low interest rates for later real estate or construction financing. Immediate financing is also possible.

Follow-Up Financing (Anschlussfinanzierung)

When the fixed-interest period of your loan expires after 10, 15, or 20 years, it is time to arrange follow-up financing for the remaining debt of your real estate or construction loan. 

• Term Life Insurance (Risikolebensversicherung): Protects the main earner of the family in case of unforeseen events.
• Homeowners Insurance (Gebäudeversicherung): Covers damage to your home caused by fire, water, hail, or storms.
• Important addition: Natural Hazard Insurance (Elementarschadenversicherung) for protection against heavy rain and flooding.