Are considering buying a house or apartment in Germany? Then you most likely will need to take out a mortgage, since real estate prices in Germany are one of the highest in Europe.
Foreign citizens can get a mortgage in Germany, providing they have a German residence permit and work permit. EU citizens will only need to prove their residency in Germany. Having a stable income is another requirement for a mortgage in Germany.
In Germany, it’s normal for people to take a mortgage at the bank, only a few can afford to buy a house with their savings. Home prices are rising every year, especially in top German cities such as Munich, Hamburg, and Berlin. In this article, we will explain if foreign citizens can obtain a mortgage in Germany and under which conditions.
Mortgages in Germany
Germany has always been the strongest economy within the EU and also one of the strongest economies around the world. For this reason, German mortgage rates are the lowest in the European Union.
Moreover, in Germany, people commonly take a mortgage at the bank, only a few can afford to buy a house with their savings. Real estate prices in Germany are one of the highest in Europe. However, terms for loans are very beneficial for borrowers.
Germans can also enjoy one of the lowest interest rates on house loans, so borrowing money won’t cost you that much.
For example, the average interest rate in Germany is 1,5% for residents and between 2,39% and 4,6% for non-residents.
Nonetheless, the homeownership ratio in Germany is less than 50% and it’s one of the lowest among the European countries.
Mortgages in Germany are usually obtained at classic banks and financial institutions assuming applicants have justified the reason for borrowing.
Also read: How to get a personal loan in Germany.
Mortgages for Foreigners in Germany
Firstly and most importantly loans, mortgages, and personal loans in Germany are possible for foreigners.
Banks don’t discriminate accordingly to your nationality but they might offer different conditions to different people based on their residency and citizenship.
Nonetheless, when a foreign citizen (non-EU) applies for a mortgage, most banks will ask for the residence permit and work permit.
At most credit institutions in Germany, EU citizens only need to have a residence in Germany to get a mortgage or loan.
EU citizens and PR holders have higher success rates in getting a loan or mortgage in Germany.
The situation is different for non-EU nationals. Here, you must be able to present a residence permit and a work permit when applying for a mortgage.
The period of validity of the residence permit or work permit also plays a role.
Having a stable income is by far the most important factor for non-EU citizens when obtaining a mortgage in Germany. Likewise to German nationals, foreigners must prove their income with wage slips or tax notices.
In general, the higher your salary and the longer the employment agreement, the higher your chances of getting a mortgage and getting it at better terms&conditions.
Foreign citizens can also use the help of a guarantor. It can be their relatives or acquaintances for example. The guarantor should have a decent salary and no debts. He or she will pay your loan installments in case you no longer can cover it on your own.
Overall, foreign nationals can get a mortgage in Germany if they fall under the following criteria:
- Having a residency in Germany
- Having a current account with a German bank
- Having a regular income
Nonetheless, according to the law, foreigners have a right on getting a mortgage in the country, but it will mostly depend on the bank and your life situation.
For example, your residence status has a large impact on how much you can borrow and for how long. The loan approval and conditions will also depend on your employment and income.
Read more about loans for foreigners in Germany in this article.
The duration of your mortgage depends on the amount of your loan and the annual repayment you are going to make. A mortgage period in Germany usually lasts for 25 or 30 years.
In many cases, the interest rate is fixed for the first 10 years. Afterward, you have to make a new mortgage contract based on the circumstances by then.
Requirements for getting a mortgage in Germany
In order to get a mortgage, you need to meet several criteria in Germany. The bank will prove your creditworthiness, this is the most important factor when it comes to loans and mortgages in Germany. Following will be considered by the bank:
- Savings and capital
- Schufa – credit score
If you are planning to take out a mortgage in Germany you should reside in Germany. You must also be able to prove it by providing a German residence permit and address registration.
To get a mortgage in Germany one should have a stable income. Loans are granted for employees but also for self-employed people.
The minimal requirement for employees is to be employed at the company for between three months to six months.
Self-employed persons, business owners, and freelancers are usually required to have been self-employed for a longer time. Many banks want to see that you have been working for yourself for at least two years.
Moreover, information about your work and income is not sufficient for getting a mortgage and determining your creditworthiness. Bank also will consider:
- Your rent plus utilities costs
- Child support costs
- Living expenses
- Instalment payments for existing financing, loans
After calculation, all these expenses bank will make a decision whether an applicant will be able to pay a mortgage in a sustainable way.
Where your monthly mortgage payments should never exceed 40% of your monthly income.
Employees should have an income that is sufficient for taking a mortgage. The higher the income the highest your chances of getting it.
People on the probation period will have difficulties obtaining a mortgage or loan. However, a fixed-term employment contract won’t be a big problem. They are very common in Germany.
As a self-employed, your monthly income will determine your creditworthiness for granting the mortgage.
Banks also want to see your current tax statements to verify the accuracy of the income information. Sometimes they also look into books, to see your revenues.
Moreover, people who have been self-employed successfully for a long time will have better chances.
How much money do you have?
Applicants with some savings and equity will surely have advantages when getting a mortgage in Germany. Yet keep in mind that you need to have some amount beforehand because banks usually don’t grand a 100% price of the property you want to purchase.
In the case of construction financing, some banks require not only a good credit rating but also equity capital amounting to 20% of the purchase price. If you are taking a small consumer loan no equity is required.
Required documents for the mortgage in Germany
When applying for a mortgage most banks will ask you to provide these documents:
- Employment contract
- Income proof for employees – payslips for last 2–12 months
- Self employed and freelancers – balance sheets for last 6-24 months, prior year’s tax returns
- Last three years’ annual accounts for self-employed
- Current expenses and liabilities
- Property assessment
- Proof of available equity – savings accounts, financial investments, life insurance policies, shares, etc.
- Extract from the Land Register for the previous six weeks
Plus as a foreigner, you need to provide a copy of the passport and residency permit.
Your credit score
Credit score plays a detrimental role when applying for a mortgage in Germany. All German banks will check your SHUFA or credit score.
Your credit score in Germany depends on a lot of things, such as:
- Annual gross income
- Lenght of the work contract
- The lenght of the overall stay in Germany
- The number of loan applications already made
- The number of loan refusals
- Missed loan payments
- The number of loan approvals
SHUFA score will also depend on your disposable income, which is calculated by taking your monthly net income and deducting all recurring fixed costs, like rent, insurances, etc.
After the SHUFA check is made, the bank will tell you if they would offer you a mortgage and under what conditions. The credit check can also be a factor to the interest rate you are given and the mortgage amount.
Real estate buyers from abroad with foreign income
Do you live in the EU and want to buy real estate in Germany by taking a mortgage in the country?
Financing in Germany can be possible if the foreign buyer has his or her income in EUR currency and reside within the EU.
Generally, only a small group of banks are willing to offer real estate financing for non-residents in Germany. Anyone who earns their income abroad and wants to purchase and finance a home in Germany will rely on those banks.
Most of the banks are giving mortgages only to the applicants who live within the EU and earn their salary in euros. This means that financing is no longer possible for people who live and work in the UK or Denmark, for example.
For all those who live and work in Switzerland, on the other hand, the situation is much better and they can get a loan in Germany.
Moreover, people who are living in an EU country with a different currency than EURO have no opportunity to get a mortgage to buy a house in Germany.
Besides that, people who are residing in Germany and are employed by companies abroad (non-euro currency) will have difficulties getting a mortgage in Germany.
The amount of needed equity will depend on the location of the property. For houses in top German cities such as Munich, Stuttgart, Hamburg, and especially Berlin you will need to contribute more of your savings.
Also read: How to get a personal loan in Germany.
How much money can you borrow in Germany?
So by now your chances of getting a mortgage in German banks look pretty good, by how must they will lend you?
Here we can see some differences between German residents and non-residents e.g foreign buyers from abroad. If you live in Germany you can get up to the 80% of the total costs (including notary costs and brokers fees), while non-residents will be financed only to 55-60% of the final costs.
In the table, you can see how much German banks are typically lending with a given salary.
|Net Salary||Maximal Mortgage Amount||Monthly Installment|
|1.000 €||90.823 €||300 €|
|1.500 €||128.666 €||425 €|
|2.000 €||174.078 €||575 €|
|2.500 €||211.921 €||700 €|
|3.000 €||257.333 €||850 €|
|3.500 €||302.744 €||1.000 €|
|4.000 €||340.588 €||1.125 €|
|4.500 €||385.999 €||1.275 €|
|5.000 €||423.842 €||1.400 €|
Tips on getting a mortgage in Germany
To increase your chances of getting a loan in Germany as a foreigner, be sure you have a long-term residence permit first. Applicants with a settlement permit (PR) will have the best chances.
- Establish a good creditworthiness history.
- Provide income and financial proof – you can support yourself and are able to pay back the money.
Places Where You Can Get a Mortgage in Germany
Home mortgages can be obtained at traditional banks, savings banks, specialized real estate banks (Bausparkassen), or insurance companies. In addition, you can finance some part of the home price through KfW*.
*KfW is a German state-owned investment and development bank.
As a property owner or buyer, you can receive such a subsidy at KfW if you are planning the following:
- an energy-efficient renovation of the house
- conversion into an energy-efficient house, or
- a reconstruction due to the age of the building
Another option to get a mortgage in Germany would be with help of intermediaries. They work with numerous banks and look for the best offer for you.
Alternatives for taking a mortgage in Germany
- and receive a loan in Germany
Smava will give you an overview of 70 loans from more than 20 leading credit banks, online lenders, and peer-to-peer lenders. For any help, you can reach out to one of 200 loan advisors.
To apply for a loan you have to meet at least the following requirements:
- Majority age (= full legal age, minimum 18 years)
- (Registered) Residency in Germany
- Bank account in Germany
- Sufficient regular income (Employment or self-employed or pension)
- No negative entries in your SCHUFA (German credit score)
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If you don’t have enough savings to get a mortgage in Germany
If you don’t have enough savings or equity to get a mortgage you can apply for a loan. For example, one can easily get a loan of 50,000 EUR to add to the final price of the house.
Auxmoney is the easiest place to get a loan, the process is simple and doesn’t involve much paperwork.
Besides that, they provide money for different categories of people including self-employed, students, freelancers, and of course employees.
Compare mortgages and loans in Germany
Verivox is the largest German platform to compare loans, electricity & gas plans, car insurances, and internet deals.
There you can choose the type of loan and the conditions. Loans up to 100,000 EUR with a duration of up to 10 years are available. All inquiries via Verivox are SCHUFA-neutral.
Finanzcheck.de is the first place where you should compare loans and mortgages. in Germany. In fact, you can just do it in the form below, just select the loan amount and the duration.‹html› ‹head›…‹/head› ‹body› ‹div› ‹/div› ‹/body› ‹/html›
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