How to compare mortgage offers in Germany

How to compare mortgage offers in Germany

Choosing the right mortgage in Germany will shape your long-term financial burden. Beyond the nominal interest rate, pay attention to the effective interest rate (eff. APR), additional costs, and prepayment flexibility.

Key comparison factors

• Effective interest rate (eff. APR): Includes interest, processing fees, deferral costs, and other mandatory charges.

• Fixed-interest period: Typically 5, 10, or 15 years in Germany. After that, refinancing or follow-up financing is required.

• Prepayment options: Check if you can repay early without penalties—important for flexibility.

• Loan term and remaining debt: Consider repayment rate and the remaining debt after the fixed-interest phase ends.

• Flexibility: Look for options like adjusting the repayment rate or pausing installments if your situation changes.

Use platforms like Interhyp, Check24, or Dr. Klein to compare offers. Tools from KfW or Sparkassen are also helpful. A financial advisor can identify and optimise government support tailored to your needs.

Negotiation tips for better terms

With good credit, high equity, and a stable income, you can negotiate lower spreads or reduce fees. Banks may offer better terms if you have an existing account or combine products like insurance.

Ask about promotional offers, flexible repayment models, and how to combine your loan with KfW funding. The better prepared you are, the more negotiating power you’ll have.

Understanding mortgage types in Germany

Understanding mortgage types in Germany

In Germany, a home loan—also known as a mortgage or “Baufinanzierung”—is the standard way to finance the purchase, construction, or renovation of property. Banks, building societies, and government lenders offer a range of products tailored to your income, risk profile, and project type.

Common mortgage types in Germany

• Annuity loan: Fixed monthly payments with a decreasing interest portion and increasing principal repayment over time.

• Full repayment loan: Repaid in full by the end of the term with a fixed repayment plan—often with lower interest rates.

• Variable interest loan: Usually tied to short-term interest rates (e.g., 3-month terms). Offers flexibility but carries rate risk.

• Building society loan (Bauspar): Combines a savings phase with a guaranteed low-interest loan. Popular for long-term planning.

• KfW loan: State-subsidised financing for energy-efficient construction, renovation, or homeownership.

Annuity loans are the standard in Germany and offer reliable planning for stable income. Subsidised products like KfW loans can significantly improve affordability—especially for sustainable projects or first-time buyers.

Basic eligibility for mortgage approval

Most banks finance up to 80% of the purchase price. For better terms, 20–30% equity is recommended. Applicants typically need a permanent job contract, a good Schufa credit report, and a registered, unencumbered property.