German Mortgage

German Mortgage: What non-residents and foreign investors should know

Taking out a mortgage represents one of life’s greatest opportunities: the benefit of investing in a property or buying a home. Investing in a buy-to-let property or your own home in Germany is a good decision for many reasons. For one, Germany is one of Europe’s safe havens for capital and stability is a hallmark of the country’s real estate market. However, a mortgage also represents one of the most significant debts that most people will ever take on. Here, you will find all the essential advice that non-residents and foreign investors need to know when taking out a German mortgage. 

You’ll also find an example of an annuity mortgage calculation of a non-German resident who financed his property with a home loan. If you’re a foreigner looking for a German mortgage, the following article will help you understand the process. We will review the characteristics of German mortgage markets and outline the mortgage products offered. Overall, an essential read to ensure a smooth process.

How do mortgages work in Germany?

As a non-resident or foreign investor, there might be a difference between German mortgages and those in your country of residence. Here are a few details to keep in mind:

  • You’re expected to put down a deposit of 30-40% as an expat. Your bank might also ask you for evidence of regular savings.
  • Your German mortgage might last between 25 and 30 years, with fixed interest rates for ten years or longer. 
  • Compared to many countries, there are few banks that provide higher-risk mortgages in Germany.
  • Part of your mortgage interest may be tax-deductible when purchasing a buy to let property.

As the competition for properties in Germany increases, non-residents and foreign investors must be well-prepared. Here are a few things to consider:

Gain a competitive advantage

Getting expert advice on a mortgage in Germany, considering the mortgage structure, repayment schedule, and information on how to get preapproved for a mortgage loan is critical. Being well-prepared will help you act quickly once you decide to buy a property in Germany. This competitive advantage can help you “beat out” other applicants interested in the same property. Proper preparation also includes all the documents needed for a mortgage in Germany. In our article, you will find all the information you need in order to be well-prepared for the first bank appointment for a mortgage in Germany.

Plans how to finance your home with a German mortgage.

Which mortgage types exist in Germany?

The German mortgage market has a few particular characteristics. To be well-prepared, you have to consider the typical mortgage types in Germany. In Germany, the concept of “shopping” for a mortgage and refinancing every few years does not exist. This needs to be considered when being of another cultural background of property ownership. In Germany, carefully evaluating the options to get the best deal the first time around is key. Using a brokerage service like Loanlink24 can also help buyers understand exactly the options and types of products available.

Here are a few of the popular ones:

The annuity loan

 The most common mortgage loan type in Germany is the annuity loan (“Annuitätendarlehen”). The annuity loan is a fixed-rate loan. The monthly mortgage interest rates remain constant over the life of the loan. In the beginning, the interest portion of the installment is high. At the same time, the repayment portion of the installment is low. As the borrower repays the loan, the interest portion decreases, and the loan repayment portion increases. During the fixed term, the monthly payment will remain the same. The so-called “debit interest commitment” or „Sollzinsbindung“ is available for a period of 5,10,15,20 or more years.

In general, 10 years is the most common fixed term. In most cases, the longer the fixed term is, the higher the interest rate would be. Borrowers usually repay the loan on a scale from 1% to 10% principal rate per year (also known as “Tilgung”). Likewise, the borrower has the option of paying up to an additional 5% of the loan annually (known as “Sondertilgung).

After the initial mortgage runs out, most borrowers will refinance with another mortgage at a new market rate. Another option is to secure interest rates at the current level (“Forward Darlehen”), which borrowers can arrange a maximum of 5 years before the end of the existing mortgage.

To understand more about mortgage calculation for an annuity loan, please check this loan calculator for more information. Here are some pros and cons about annuity loans summarized for you:


  • Constant amount to pay
  • Each payment increases the amortization portion and decreases the interest portion
  • The interest rate is fixed
  • Repayment rate can be chosen freely (starting from 1%)


  • Fixed rates that cannot be changed for the agreed period of time
  • Low flexibility due to the fixed rates
  • No contract changes during the term

The interest-only loan

With the interest-only or fixed-rate loan (“Zinszahlungsdarlehen“, or „Endfälliges Darlehen”), borrowers repay the whole interest portion over a fixed term. The monthly repayments are pretty low compared to an annuity loan. But, of course, the total amount of the outstanding debt is still due at the end of the fixed term. In Germany, interest payments can be tax-deductible. That said, an interest-only loan can be an attractive option for buy-to-let investors if they are German taxpayers. When using this type of loan for long-term mortgage funding, the borrower should always ensure that other savings or assets can cover the outstanding loan at the end of the term.

In the case of a fixed-rate loan, you have the option of making a further payment parallel to the repayment of interest, which serves to cover all or a part of your repayment costs at the end. For example, building saving contracts so-called “Bausparverträge”, life insurance, or fund saving plans can be used for this purpose.

Here are some pros and cons about the interest-only loan summarized for you: 


  • Fixed debit interest rate until complete repayment
  • Interesting for investors and landlords
  • Lower financial burden


  • Higher debit interest
  • High repayment costs at the end of the loan
  • Banks demand more collateral
  • Few banks offer it

Is it possible to pay back my mortgage faster in Germany?

Yes, but under certain conditions, depending on the contract with your lender. In general, many banks offer a voluntary payment of between 5-10% once a year. Some lenders also allow you to change the principal payment up to five times during the fixed term of the mortgage.

You may also choose to pay off your loan in a single payment. However, there might be a penalty. If the loan is fixed for up to 10 years, you must pay a fine to opt out earlier. This fee equals the number of remaining interest payments in your mortgage term. If the loan is fixed for longer than 10 years, you may opt-out after the first 10 years without paying a fee. Nonetheless, it is essential to always speak with a mortgage advisor to compare all your mortgage options thoroughly to ensure you find the best mortgage that fits best with your circumstances.

How much can I afford for a German mortgage?

Non-German residents have no restrictions on purchasing German real estate. This is true regardless of whether your country of origin is a part of the European Union (EU) or not.

Zwei Personen an Laptops.

However, the maximum amount of mortgage that non-residents can take depends on their residency status:

  • If you have full German residency: You can get a German mortgage without a down payment in. This means you can receive total financing of the property and a second loan to cover the closing costs.
  • If you live and work in Germany: Up to 100% of the property value is possible. However, you will get the best interest rates for 50-60% debt funding.
  • If you live and work abroad: Up to 60-70% of the property value is possible.

We recommend you to be sure how much you really can afford. The running costs of owning a house are, besides the additional costs of buying a house, one of the least considered costs of buying a house in Germany. In our article, we have listed all the hidden costs during homeownership for you.

Additional fees to consider with your German mortgage

When you buy a property in Germany, you have to pay not only the purchase price, but also the closing costs. You must pay these fees out of your pocket unless you’re a full German resident. Then, you can apply for a secondary loan that can cover the closing costs. Closing fees include land registration fees, notary fees, real estate agent fees, and property taxes and can reach roughly 12% of the property priceTo calculate your total purchase costs or see how your German mortgage may look like, check out LoanLink24’s mortgage calculatorRemember, your monthly mortgage payments can never, under any circumstances, exceed 35% of your monthly income. You can use the LoanLink24 tool, Borrowing Power Calculator, to find out your borrowing power.

Our LoanLink24 mortgage advisors are happy to answer any questions. Our goal is to help you find the best loan. You may email us at or call us at 0800 05 28000. You can also start with the LoanLink24 mortgage illustrator and check your mortgage optionsLoanLink24 specializes in finding the most suitable property loan for non-German residents. Our algorithm screens more than 400 banks to find the best deal. Our financial advisors are experienced and will guide you through every step. Got a question about the real estate valuation or mortgage application process for EU Blue Card holders in Germany? Contact us!

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