German Mortgage

Mortgage in Germany: 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 house in Germany. Investing in a buy-to-let property in Germany is a good decision for many reasons. For one, Germany is Europe’s safe haven for capital. Stability is a hallmark of the country’s real estate market. Even so, a mortgage also represents one of the largest  debt that most people will ever take on. Thus, we want to show you all the basic information foreigner should know when taking out a German mortgage. 

Gain a competitive advantage

Getting expert advice on the right mortgage structure, repayment schedule and get pre-approved for a mortgage loan in Germany are critical. Being well prepared will help you act quickly once you decide to buy a property in Germany. This is a competitive advantage that can help you “beat out” other applicants who are interested in the same property. 

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

Special characteristics of the German Mortgage market

Typical Mortgage types in Germany

The concept of “shopping” for a mortgage and refinancing every few years does not really exist in Germany. This is important, since some buyers come from a different property ownership culture. In Germany, carefully evaluating the options to get the best deal the first time around is key. Using a brokerage service can also help buyers understand exactly the options and types of products available.

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 instalment is high. At the same time, the repayment portion of the instalment 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.

A borrower generally repays a mortgage over a fixed term of 5 to 30 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 2% to 10% principal rate per year (also known as “Tilgung”). Likewise, the borrower has the option of paying up to 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 mortgage calculator for more information.

The interest-only loan

With the interest-only loan (“Zinszahlungsdarlehen”), borrowers repay the interest portion over a fixed term. The monthly repayments are quite low compared to an annuity loan. But, of course, the full 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 make sure that other savings or assets can cover the outstanding loan at the end of the term.

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 penalty if you want to opt out earlier. This fee equals to the amount 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 personal circumstances

How much German mortgage can I afford?

Mortgage in Germany: What can you afford and what are tips and tricks for a 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).

Maximum financing for foreigners

That said, the maximum amount of mortgage non-residents can borrow does depends on their residency status:

  • If you have full German residency, it’s possible to get a mortgage without a down payment in Germany. This means you can receive full financing of the property, and a secondary 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 best interest rates for 50-60% debt funding.
  • If you live and work abroad: up to 60-70% of the property value is possible.

Mortgage Germany

Additional fees

When you buy property in Germany, you will need to pay closing costs in addition to the property purchase price. You must pay these fees out of your own 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 up to 16% of the property price.

To calculate your total purchase costs or see how your German mortgage may look like, check out the LoanLink’s mortgage calculator.

Remember, your monthly mortgage payments can never, under any circumstances, exceed 35% of your monthly income. You can use the LoanLink tool, Borrowing Power Calculator, to find out your individual borrowing power.

Our LoanLink mortgage advisors are happy to answer any questions. Our goal is to help you find the best loan.

You may email us at or by phone +49 (0) 30 5683 7535. You can also start with the LoanLink mortgage illustrator here:

LoanLink 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 holder in Germany? Contact us!

Join our newsletter for mortgage tips!


By entering your details, you agree with the following: