Glossary of mortgage terms
The most frequently used German mortgage terms.
A
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Account management fees
DE Kontoführungsgebühren
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Amortization
DE Amortisierung
Paying off debt with a fixed repayment schedule in regular installments.
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Annuity
DE Annuität
Interest and Repayment Rate combined
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Annuity loan
DE Annuitätendarlehen
Most common loan in Germany. The rates of the annuity loan remain constant over the term of the loan.
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Appraisal
DE Gutachten
A valuation of a property. If done by a real estate appraiser they will come up with a market value based on recognized procedures. Typical fee around 1,500 – 2000.
B
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Borrowing need
DE Finanzierungsbedarf
Loan amount required based on the property costs, purchase fees and the maximum deposit
Alternate terms: mortgage amount
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Borrowing power
DE Kreditfähigkeit
Maximum mortgage a bank would provide
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Building society loan
DE Bausparvertrag
This is essentially a home saving contract where participants of the program first pay into a common pool of money in a building society (Bausparkasse), which is a certain percentage of the required loan. Then the payments are given to people who already have a loan claim. Subsequent home savings then finance the mortgages of the predecessors. This is based on the pay-as-you-go system. You benefit from low and secure interest rate and guaranteed constant monthly installments. This program is supported by the German state.
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Buy-to-let mortgage
DE
It is a kind of mortgage specifically made for people who purchase the property solely for the purpose of renting it out. For tips and tricks on getting buy-to-let mortgage, please read more here.
C
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Construction lien
DE Grundschuld
Grundschuld
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Credit score
DE SCHUFA
The lenders calculate a credit score (SCHUFA) through collecting information from various public sources such as association, commercial registers, public debt directories of the local courts etc. It indicates the chance with which the loan is reliably repaid. Hence, the higher the score, the better the creditworthiness of the debtor. And borrowers with higher SCHUFA score are more likely to get lower interest rate.
D
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Delivery authorisation
DE Zustellungsvollmacht
Zustellungsvollmacht
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Deployment rate thereafter
DE Bereitstellungszins danach
Bereitstellungszins danach
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Deposit
DE Anzahlung / Eigenkapital
The deposit should at least cover all of the real estate purchase fees
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Down payment
DE Anzahlung
The amount of money the buyer is putting towards the financing. Lenders require a minimum amount in order to qualify for the mortgage.
E
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Effective interest rate
DE Effektivzins
Actual interest rate including all credit costs
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EMI equated monthly installment
DE Gleichgesetzte monatliche Rate
Is one part of the equally divided monthly outgoes to clear off an outstanding loan within a stipulated time frame
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Equity
DE Eigenkapital
The difference between the value of the property and the mortgage amount. Over time, as the amount of loan decreases with payments, the equity of the home generally increases.
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Estimated cost
DE SchätzkostenLorem ipsum dolor sit amet, consetetur sadipscing elitr, sed diam nonumy eirmod tempor invidunt ut labore et dolore magna aliquyam erat, sed diam voluptua.
F
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Fixed-borrowing rate
DE Sollzinssatz
The interest rate doesn't fluctuate during the fixed rate period of the loan. This allows the borrower to accurately predict their future payments.
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Fixed interest term
DE Sollzinsbindung
The amount of years the interest rate on the mortgage will stay constant at the fixed rate.
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Fixed-term mortgage
DE Festverzinsliches Darlehe
Context: Payments are scheduled; the borrower can’t pay off the loan before the maturity date. The borrower may be able to make unscheduled/voluntary payments. Often lower interest rate.
“Can I take out a fixed-term mortgage for 10 years?”
G
I
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Independent mortgage broker
DE Unabhängiger Darlehensvermittler
An independent mortgage broker is an intermediary, linking the borrower to a lender or mortgage companies, which is usually a bank or insurance company. The mortgage broker manages the application on the customers behalf, researching products, dealing with lenders, and taking the burden off the customer.
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Initial principal
DE
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Interest-only loan
DE Zinszahlungsdarlehen
This type of home loan means that you only have to pay the interest during the term of the loan, which is different from annuity loan where borrowers have to pay repayment every month. At the end of the loan term, borrowers have to refinance the mortgage or pay the rest of the loan with a one-off payment. This kind of home loan is particularly suitable for landlords and real estate investors in Germany.
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Interest rate
DE Zinssatz
This money goes toward the interest on your loan.
K
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KfW
DE Kreditanstalt für Wiederaufbau
KfW is a German government owned development bank. It offers various low interest support programs that help homebuilders ad buyers with mortgage, building or renovating a home. Borrowers can often combine one funding program with others. For more information, please visit: https://www.loanlink24.com/blog/overview-kfw-funding/
L
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Lien
DE Hypothek / Grundschuld
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Loan amount
DE Darlehensbetrag
The amount the borrower promises to repay, as set forth in the loan contract.
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Loan duration (calculated)
DE Darlehenslaufzeit (kalkulatorisch)
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Loan-to-value ratio
DE Beleihungsauslauf
It represents the ratio of the mortgage amount to the appraised value of an asset purchased. If your deposit is 10%, then your loan-to-value ratio is 90%. If your deposit is 25%, then your loan-to-value ratio is 75%.
M
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Method of repayment
DE Art der Tilgung
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Mortgage overpayment
DE
It means you pay more towards your mortgage than the initial amount agreed between you and the lender. Some banks charge a fee more overpayment while some don’t.
N
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Negative equity
DE
It means the value of your property is lower than the outstanding balance of your mortgage
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Net income
DE Nettoeinkommen
Monthly income after taxes
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Notary
DE NotarThe notary certifies that the property is available to sell and draws up the purchase contract. Once signed, the notary will forward the relevant documents and information to the proper authorities.
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Notary and land register fee
DE Notarkosten und Grundbuchgebühren
In Germany all real estate purchase contracts must pass through a notary. The notary not only certifies that the property is available to sell, but also draws up the purchase contract itself. And, once the contract is signed, the notary must also forward relevant documents and information to the proper authorities.
→ 1.5% of the purchase price
O
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Open-term mortgage
DE Darlehen ohne feste Laufzeit
Context: A borrower generally can pay the loan off at anytime. Often higher interest rate.
“I may be able to pay off my home loan within just 3 years - can I get an open-term mortgage?
P
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Paid debt
DE Bezahlte Schulden
Amount of paid debt after a certain time
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Paid interest
DE Bezahlte Zinsen
Amount of paid interest after a certain time
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Partial payment surcharges
DE Teilauszahlungszuschläge
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Payment method
DE Zahlweise
Describes the reimbursement
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Payout ratio
DE Auszahlungskurs
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Processing cost
DE Bearbeitungskosten
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Property price
DE Immobilienpreis
The property price must exclude any additional fees such as a real estate broker courtage, taxes and notary land register fees
R
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Rate
DE Rate
Monthly amount to pay off the loan
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Real estate agent fee
DE Maklergebühren
Can vary between 3,57% to 7,14% dependent on the state where the property is located.
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Real estate purchase fees
DE Immobilien Erwerbskosten
Are additional fees not included in the purchase price like real estate transfer tax, notary fees, land register fees and any brokerage commissions.
Importantly, these fees do not include the cost of the property itself. In Germany, purchase fees may amount to up to 15% of the property’s purchase price
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Redemption free start-up years
DE Tilgungsfreie Anlaufjahre
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Remainder of debt after fixed term
DE Restschuld am Ende der Sollzinsbindung
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Remaining debt at end of fixed term
DE Restschuld am Ende der Laufzeit
Most mortgages cannot be completely paid off during the fixed-term. These remaining debts have to be refinanced with another credit.
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Repayment rate
DE Tilgungssatz
This is the money going to pay down your loan balance each month. As time goes by, you will pay a higher amount toward principal and less to interest.
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Residence status
DE Aufenthaltsstatus
There are different statuses that lead to different mortgage options
S
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Stamp duty (Real estate tax)
DE Grunderwerbssteuer
Can vary between 3,5% to 6,5% dependent on the state where the property is located
Alternate terms: real estate transfer tax
T
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Term
DE Laufzeit
Context: The length of the mortgage is generally called the term of the mortgage. A mortgage can have a fixed term - the time during which the interest rate is fixed.
“What is the average term for a mortgage?”
Alternate terms: life (for loan/mortgage), runtime (more rarely)
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Time until complete down payment
DE Zeit bis zur vollständigen Tilgung
Time until the mortgage is completely paid down. In most cases after refinancing.
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Time without commitment interest
DE Bereitstellungszinsfreie Zeit
U
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Unscheduled payment
DE außerplanmäßige Tilgung
Context: In Germany, mortgage consumers have the possibility to pay off a certain amount of the loan once a year → voluntary / unscheduled repayment
“Do I have the right to make an unscheduled payment once a year?”
Alternate terms: unscheduled payment/unscheduled repayment/voluntary payment can be used interchangeably in American English
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Unscheduled voluntarily payment
DE Sondertilgungsmöglichkeiten
Some lenders offer you the flexibility of an voluntary repayment once a year. It's an extra payment on top of your regular monthly repayment and it allows you to pay off your mortgage faster. At the same time, the interest on your remaining debt also declines. The maximum yearly payment is typically 5% of the initial loan volumes. The possibility of the amount and frequency of voluntary repayment are specified in the loan agreement.
V
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Variable loan
DE Variables Darlehen
The interest rate you pay is adjusted regularly to the current Euribor (Euro Interbank Offered Rate). The benefit of this type of home loan in Germany is that borrower’s loan becomes cheaper when the rate is low. However, monthly financial burden also increases when interest rate rises, thus, borrowers should convert it into a fixed-interest loan in this case. Processing fees may also be higher in this kind of loan compared to fixed-rate loan. This type of loan is particularly suitable for short-term mortgage when Euribor rates are low.