Finance your own home using or without equity capital options available!
In the heart of Europe, Germany offers a vibrant real estate market for those seeking to purchase an apartment. This article provides an overview of the primary mortgage loans available, key mortgage specifics, and factors that can influence interest rates when financing an apartment in Germany.
The Immobilienkredit, or mortgage loan, is the most common loan used to finance an apartment in Germany. This secured loan is specifically designed for purchasing or building a house or apartment, typically requiring a down payment of at least 20% for approval.
Another popular mortgage loan product in Germany is the Bausparvertrag, or building savings contract. Offered by building societies (Bausparkassen), this product allows for a fixed interest rate for the entire loan term at a relatively low cost. It is accessible even when traditional banks are hesitant to lend. However, it's essential to be aware of the complex costs and risk factors associated with this loan, so professional advice is recommended.
When it comes to mortgage specifics, fixed interest rate periods can be chosen from 5 to 30 years, with 10-year fixed rates often offering the best rates. Variable mortgage rates are generally more expensive and rarely used in Germany. The typical repayment rate, known as "Tilgung," is about 2–3% annually of the principal.
When it comes to financing an apartment, factors such as a low or no equity, long interest period, special repayment rights, poor credit score, and an unsecure job can negatively affect interest rates. Conversely, good creditworthiness, a secure job, high equity, short interest period, waiver of special repayments, and a good credit score can positively influence interest rates.
A higher equity share (10-20% of the purchase price) can lead to a favorable interest rate. A constant loan, a hybrid of an annuity loan and a savings loan, with both loans concluded for the required amount, is another option. The equity share for an apartment should be at least 10-15% of the purchase price to be eligible for financing by many banks.
The monthly payments to the bank during the fixed interest period provide high planning security. The total purchase ancillary costs, including notary and land registry costs, amount to approximately 10% - 15% of the purchase price. If buying an apartment from a private person, real estate agent's costs are waived, reducing the purchase ancillary costs significantly.
After the fixed interest period, the loan is usually not fully paid off, requiring follow-up financing or saving enough to settle the remaining amount. A full repayment loan, essentially an annuity loan with a longer term, fully repaid at the end of the interest period, is another option.
Crowdinvesting is becoming increasingly popular as a form of real estate investment. It's important to ensure that the interest period of the loan matches the savings phase of the savings contract to avoid unexpected problems. Financing an apartment without equity is possible but carries a high interest burden and requires caution due to the high monthly burden and possible follow-up financing at increased interest rates.
Real estate transfer tax is 3.5-6.5% of the purchase price, and real estate agent's commission is 5.9-7.1% of the purchase price, shared between buyer and seller when buying from an agency. Land registry entry fees are 0.5% of the purchase price.
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