• Germany edition
 
Personal Finance in Germany
The ins and outs of buying property
Photo: DPA

The ins and outs of buying property

Published: 18 Nov 2011 12:06 GMT+01:00
Updated: 18 Nov 2011 12:06 GMT+01:00

Buying a home is often the biggest purchase people make in their lives, so it pays to do plenty of homework before signing on the dotted line for a mortgage. Unlike countries such as the United States or Britain, Germany has never been a country with a high level of home ownership.

Nevertheless, Germany has one of the most sophisticated banking systems in Europe and consumers should weigh up their options carefully before taking out a home loan. Price comparison websites enable consumers to compare the prices of mortgages offered by a variety of leading providers.

While mortgage providers in Germany do not offer borrowers tailored English-language products, lenders such as Commerzbank, Deutsche Bank and ING DiBa all employ customer service staff with good English language skills.

“Deutsche Bank became very strong over the past two years as a mortgage lender, but also ING-DiBa, Europe's largest online bank," said Marcus Preu, deputy editor at price comparison website Biallo.de.

Compared with the mortgage markets of countries such as the US and UK, lenders in Germany require borrowers to stump up large down-payments, which can be as much as 40 percent of the value of a property.

Monika Arens, a spokeswoman for Commerzbank, said customers should have between 10 percent and 20 percent of the property purchase price. “Depending on the loan constellation and rating of the client, a smaller deposit or no deposit can also be sufficient,” she adds.

Arens said that there were no concrete rules governing the size of a mortgage loan in relation to a borrower’s income. “The granting of a loan will be decided for each client individually. This decision is based on the intrinsic value of the real estate, the total wealth of the client and his or her disposable income,” she said.

But borrowers should scrutinise mortgage offers for ancillary fees and charges.

“Sometimes banks charge ‘estimation costs’, which should be refused. Normally all fees are included in the effective interest rate. At the moment it is possible to borrow €100,000 for a period of ten years at a cost of about €320 to €350 per month,” said Preu of Biallo.de.

Property essentials

Taxes on property purchases, known as Grunderwerbsteuer, vary between 3.5 percent and 5 percent depending upon the German state where it is levied. Navigating the legalities of buying a property in Germany is not easy, especially for those who cannot speak German. This usually makes using an estate agent a sensible choice but fees for agent services are typically 6 percent of the purchase price - plus value added tax.

All property purchases in Germany have to be done under the supervision of a notary. He or she will observe both the buyer and seller signing the contract for the purchase of the property and charge a notary fee of 1.6 percent of the purchase price. A so-called Notarkonto account can also be used to transfer funds from buyer to seller, but this will cost an extra notary fee.

Prospective property buyers who sign up with an estate agent should check that the agent provides a full legal service. Buyers need a local lawyer to do the paperwork, which includes the land registry (Grundbuch), purchase contract (Kaufvertrag) and building declaration of partition (Teilungserklarung). The land registry will disclose if the property is free of encumbrances (such as old mortgages). Buyers whose estate agent fails to provide legal assistance will have to find a lawyer, who may exact a costly fee.

Only once a buyer has been listed in the Grundbuch, usually carried out at the local Bezirksamt, is he or she the legal owner of a property.

But prospective homeowners should be aware that making a mortgage payment is not the only monthly expense. If you own a flat in an apartment building, monthly fees called Hausgeld will cover water, heating costs, rubbish collection and general upkeep. They can easily add up to a few hundred euros a month depending upon the size of the property.

It is also quite common for homeowners in Germany to be liable to pay for maintenance work on the street where a property is located. The contract on the property purchase should disclose whether a homeowner will be liable for such additional charges.

Schufa credit report

When an application for a mortgage is made in Germany, the bank will contact Schufa, a credit and loan data repository. The bank will request a copy of the mortgage applicant’s Bonitätsauskunft file, which holds comprehensive details of a consumer’s credit rating.

If a prospective mortgage applicant does have an unpaid debt recorded on file, the bank could refuse the mortgage application. In such circumstances, a borrower rejected for a loan can apply for a copy of his or her Bonitätsauskunft by visiting www.meineschufa.de. An English language form is available for non-German speakers.

Once completed, the form should be sent to Schufa with a fee of €18.50 and a photocopy of an applicant’s passport which is required as a form of identification for both German and non-German citizens.

However, while a Schufa report does play an important part in determining whether a mortgage application is rejected or not, it does not play as an important a role as in other countries such as the United States.

“In America a credit reference bureau holds much more data on consumers, including information on how much he or she earns. This is not the case in Germany. So a bank considering a mortgage loan application may be more interested in how much a borrower earns, who their employer is and the size of his or her deposit. In Germany, this information is gathered by the bank itself,” said Schufa spokesman Christian Seidenabel.

The Local (news@thelocal.de)

Your comments about this article

20:49 November 18, 2011 by murka
1.6 % notary fee is pretty ridiculous given the amount of actual work. The consequence of the fossilized legislation, protecting the notary market in a mafia style. Non-Germans, even European citizens, were verboten from this profession until just 1/2 year ago, when European Court has overridden the law.
10:28 November 19, 2011 by bartschaff
Well said, murka.

Notaries are nothing but a mafia of parasites, worms that would be exterminated if legislation were modernized.
16:04 November 19, 2011 by kjello
Maybe a little on the side-line of the topic, but does anybody know how long a tenant has the right to live in a flat you buy in Berlin? Some people says 7 years others says there has been a law-change and its now 3 years...
10:13 November 24, 2011 by asteriks
don't buy home/flat, make your own house from basement till roof.
15:12 November 24, 2011 by 115spider
murka,

almost all the politicians here have law degrees (most of them even did them themselves...)

as they will need to return to the law if they get booted out of office dont expect any major changes in the little guys favour
23:28 November 25, 2011 by bobmarchiano
In the U.S. every bank has a notary and the fee is $0

When buying a house in the states you do not did a lawyer.

And if you should decided to hire one to do your paper work and to

be there at the closing the fee is normal around $250-$500.

no matter the cost of the property
01:02 December 3, 2011 by brnskin2010
This is germany ppl......
Today's headlines
Expats reveal another side of Berlin Wall
Photo: Paul Sullivan

Expats reveal another side of Berlin Wall

Two expats who walked the Mauerweg - the 160-kilometre trail that runs the length of the former Berlin Wall - have written a book about forgotten aspects of its past and present. READ  

Karstadt closes six stores to stay afloat
Photo: DPA

Karstadt closes six stores to stay afloat

Germany's biggest department store chain Karstadt will close at least six stores, putting around 2,000 jobs at risk, in a drastic bid by its new boss to return it to profit. READ  

Quiz
How well do you know Germany?
Photos: DPA/Shutterstock

How well do you know Germany?

Do you know your Saxony facts from your Saxony-Anhalt ones? Test your knowledge of Germany's federal states in The Local's quiz. READ  

Climate chief hails Bonn greenhouse gas deal
Pollution from a coal-fired power station in Frimmersdorf, North Rhine-Westphalia. Photo: DPA

Climate chief hails Bonn greenhouse gas deal

The UN's climate chief hailed a European agreement in Bonn on greenhouse gases on Friday as providing "valuable momentum" for a world pact to be inked in Paris next year. READ  

Germany gets €780m EU rebate for poor growth
Photo: DPA

Germany gets €780m EU rebate for poor growth

Germany will get an early Christmas present of around €779 million from the EU, thanks to weaker than expected GDP growth. READ  

Stay inside after blast, Ludwigshafen told
Photo: DPA

Stay inside after blast, Ludwigshafen told

It will take several days to find out what caused a massive explosion on Thursday which rocked a town on the Rhine, killing a builder and injuring 26 others. READ  

German helicopter fleet 'not fit for Nato'
An NH90 helicopter. Photo: DPA

German helicopter fleet 'not fit for Nato'

Germany's fleet of NH90 helicopters is undergoing engineering checks after one of them suffered a serious engine failure, in the latest blow to the country's military capabilities. READ  

Ex-boss of Berlin Airport farce gets €1.2m
Rainer Schwarz at a court hearing in September into the case. Photo: DPA

Ex-boss of Berlin Airport farce gets €1.2m

The man who was blamed for Berlin's miserable attempt to build a new airport must be paid more than €1 million - after being fired. READ  

Steinmeier challenges UN over Isis gas reports
Foreign Minister Frank-Walter Steinmeier and Kurds watching the attack on Kobane. Photo: DPA

Steinmeier challenges UN over Isis gas reports

Foreign Minister Frank-Walter Steinmeier pressed UN General Secretary Ban Ki-Moon to bring possible poison gas use by Isis in Iraq before the Security Council. READ  

Spring back in German consumers' step?
Photo: DPA

Spring back in German consumers' step?

Update: Consumer confidence in Germany has stopped falling, as households appear to be no longer fazed by concerns about the economic fallout from geopolitical crises, a new poll found on Friday. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Photo: DPA
Politics
Satirist lives the dream on EU gravy train
Photo: DPA
Gallery
PHOTOS: Huge explosion rocks Ludwigshafen
Photo: DPA/Shutterstock
Gallery
Which high school cliche is your German city?
Photo: DPA
Gallery
Storm hits southern Germany
Sponsored Article
An international school unlike any other : School on the Rhine
Photo: Fitzpatrick family
Society
'We still don't know what happened to Matthew'
Photo: Mariana Schroeder
Munich
Special Report: Hope and chaos at Munich's refugee shelters
Photo: DPA
Culture
Can you top our history quiz leaderboard?
Photo: DPA/Shutterstock
Gallery
11 things Germans are afraid of...
Photo: DPA
Business & Money
JobTalk: All you need to know about working in Germany
National
Share news tips with The Local Germany
Sponsored Article
Bilingual education from nursery to graduation at Phorms
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

Latest news from The Local in Sweden

More news from Sweden at thelocal.se

3,533
jobs available
Toytown Germany
Germany's English-speaking crowd